US equities finished a rough week lower with the S&P 500 down 0.6%, the Dow losing 0.3%, and Nasdaq 100 shedding 0.7% as they struggled to maintain their footing amid the intensifying regional conflict and persistent energy market volatility. Defense Secretary Pete Hegseth signaled a further escalation on Friday by announcing the largest wave of US strikes against Iranian targets, cementing the blockade of the Strait of Hormuz and stoked fears of a prolonged stagflationary global environment. This pressure drove investors toward the dollar, pushing major benchmarks toward a third straight week of losses while high energy costs forced markets to reprice 2026 rate expectations. Yields climbed despite weak Q4 GDP, heavily pressuring credit-sensitive sectors. Software giants led the decline, notably Adobe plunging 7.6% after a guidance miss and CEO departure, while Meta, Palantir, and Oracle dropped between 3.8% and 1.7%.

The US economy expanded an annualized 0.7% in Q4 2025, the weakest performance since Q1 2025 and well below 1.4% in the advance estimate. Consumer spending slowed more than anticipated (2% vs 2.4% in the advance estimate), as purchases of both goods (0.4%) and services (2.7%) cooled. Fixed investment also increased less than expected (1.6% vs 2.6%), largely due to a sharper drop in structures (-7.1%) while investment in equipment (3.9%) and intellectual property products (5.7%) remained robust. Residential investment nearly stabilized (-0.5%). Exports declined at a faster pace of 3.3%, compared with the initial estimate of a 0.9% drop, marking the largest contraction since Q2 2023. Imports also fell (-1.1% vs. -1.3%). Meanwhile, government spending and investment contracted sharply (-5.8% vs -5.1%), subtracting 1.03 pp from overall growth, due to the government shutdown. For 2025, the US economy expanded by 2.1%, slightly below the initial estimate of 2.2% and down from 2.8% in 2024.

WTI crude futures rose over 2% toward $98 a barrel on Friday as the blockade of the Strait of Hormuz continues to choke 20% of global daily energy throughput while markets digest the latest escalation in regional hostilities. Defense Secretary Pete Hegseth announced Friday that the United States will launch its largest wave of strikes yet against Iranian targets, an intensification that has effectively halted standard commercial maritime traffic and forced major Gulf producers to curtail output due to storage reaching critical capacity. This persistent supply shock is severely tightening the global energy balance because alternative export routes remain insufficient, compelling international buyers to compete for limited non-Gulf cargoes while shipping costs skyrocket due to elevated war-risk insurance.

The war in the Middle East and its impact on energy supply will continue to dictate global markets and will play a key part in a series of rate decisions from major monetary authorities. The Federal Reserve will headline such decisions in Chair Powell's second-to-last meeting in his term. Policy setting is also featured for G10 monetary authorities in the ECB, BoJ, BoE, SNB, RBA, BoC, and the Sveriges Riksbank, in addition to central banks in China, Brazil and Russia. Regarding economic data, key releases include the US PPI and industrial production, the Eurozone trade balance, the UK and Australian unemployment rate, and the Canadian inflation rate. Additionally, China will release its industrial production, retail sales, unemployment rate, housing prices, and fixed-asset investment.

Employment in Canada fell by 83,900 or 0.4% in February 2026, following a 25,000 decrease in January and sharply missing forecasts for a 10,000 increase. The latest figure also marked the sharpest decline since January 2022, with losses concentrated in full-time positions, down 0.6% or 108,400, while part-time employment was little changed, up 24,500 after a drop in January. By sector, employment declined in wholesale and retail trade (-17,900; -0.6%), other services (-13,900, -1.8%), information, culture, and recreation (-12,000, -1.4%), and construction (-11,800; -0.7%). Offsetting gains were seen in transportation and warehousing (+10,300; 0.9%) and public administration (+8,100; 0.7%). Regionally, employment fell sharply in Quebec (-57,000; -1.2%), followed by Saskatchewan (-5,500; -0.9%) and Manitoba (-4,000; -0.5%), while it increased by 2,100 (+0.8%) in Newfoundland and Labrador.

The core PCE price index in the US, which is the Federal Reserve's preferred gauge of underlying inflation in the US economy, rose by 0.4% from the previous month in January of 2026, the same pace as the 10-month high from the previous month. The rise was in line with market expectations. From the previous year, the core PCE price index rose by 3.1%, the highest in nearly two years, picking up from the 3% in the previous month and remaining sharply above the Federal Reserve's 2% target.