Ready for More Intense Volatility? Markets Focus on US-China Relations Amid Middle East Escalation Colliding with "Super Central Bank Week"! "AI Faith" Also Faces Major Test

Financial Express APP has learned that since the U.S./Israel airstrikes on Iran at the end of February ignited a new round of Middle East geopolitical superstorms, global stock markets have become increasingly volatile under the substantial blockade of the Strait of Hormuz. The “continuous surge and plunge” style fluctuations have escalated further. This week, such rare recent volatility may intensify even more.

China and the U.S. will hold the sixth round of economic and trade consultations in Paris—concerning global trade and economic growth trends. The two sides will be guided by the important consensus from the leaders’ summit in Busan and previous calls, focusing on trade issues of mutual concern. This week, China’s domestic industrial, retail, and investment data for January-February will be released one after another, with global investors focusing on China’s economic start and holiday consumption season; the State Council Information Office will hold a press conference on the operation of the national economy, attracting worldwide attention.

After Trump announced that the U.S. military launched a “fierce airstrike” on Iran’s oil export hub at Kharg Island, the Middle East geopolitical situation has rapidly escalated. Iran may take more aggressive measures in retaliation. The Strait of Hormuz shipping and Gulf oil-producing countries’ oil supplies could drive international oil prices toward $150 or even $200 per barrel; meanwhile, the “Super Central Bank Week” will trigger investors to prepare for “days of market volatility.” The Federal Reserve, European Central Bank, Bank of Japan, Bank of England, Reserve Bank of Australia, and Bank of Canada will all release their latest interest rate decisions and monetary policy guidance this week amid a macro environment overshadowed by “stagflation” pessimism.

With Nvidia’s GTC conference and the Global Optical Communications Conference (OFC) kicking off this week, along with China’s two leading tech and cloud computing giants—Alibaba and Tencent—announcing earnings, and global memory chip leader Micron (MU.US) releasing its latest results and future guidance, the “AI faith” that influences global tech stocks faces a “super big test” this week. The overall outcome of this highly anticipated test will have an unprecedented impact on the trend of the tech bull market in U.S. and global stock markets.

Additionally, the U.S. stock market’s “Quadruple Witching” will arrive on Friday—when stock index futures and options, as well as individual stock options and futures, all expire. Quadruple Witching often causes extreme volatility. Coupled with multiple major events this week acting as strong catalysts, record-breaking market swings on that day are possible.

“High volatility is a common enemy for all professional traders,” especially in the current environment. This high-volatility environment is expected to persist in the short term. The real damage to professional funds isn’t just the difficulty in direction judgment, but also the increased hedging costs, shortened holding tolerances, compressed leverage efficiency, and the possibility that even correct fundamental judgments may be overtaken by wrong timing. In other words, traders are now fighting not just a single trend but multiple noise layers—such as oil price gaps, frequent market reversals, systemic fund rebalancing, private equity credit, and AI panic.

As international oil prices stabilize above $100, markets are already eyeing a breakthrough to $150, or even $200.

Following the attack on Iran’s key oil export hub Kharg Island by the U.S., international oil prices surged intraday by 3.3%. This military action marks a sharp escalation in regional conflict. Due to ongoing hostilities, energy-consuming countries worldwide have been forced to deal with energy supply disruptions for over two weeks. As the core hub for Iran’s oil exports, Kharg Island handles most of the country’s crude transportation. Iran may launch further military counterattacks on Israel, U.S. military bases in the Middle East, and other critical energy infrastructure, embassies, U.S. financial institutions, data centers, and key areas linked to the U.S. and Western allies. The “Middle East powder keg” risks further spiraling out of control.

Early Asian market data show gold and silver prices falling sharply, while oil futures prices rose again, with WTI crude reaching over $102 and Brent crude surpassing $106.

Meanwhile, traders are assessing reports that the U.S. is about to announce the formation of a national coalition to escort ships passing through the Strait, which explains the initial surge and subsequent pullback in oil prices. U.S. officials have indicated that the Pentagon is considering deploying more destroyers to escort oil tankers passing through the strait. However, officials emphasize that even if reinforcements are sent, escort operations will not start immediately; they will wait until Iran’s threats diminish, a process that could take a month or longer.

The bombing of Kharg Island significantly expands the scope of the geopolitical conflict. The International Energy Agency (IEA) last week reported that this round of conflict has caused the most severe supply disruptions in the history of the global oil market. The strategic route connecting the Persian Gulf to international markets—the Strait of Hormuz—has almost completely halted shipping since the conflict erupted.

The Dutch-based commodity strategy team at ING stated in a recent report: “Although the attack on Kharg Island has not directly damaged oil infrastructure, supply-side risks continue to accumulate. Any further transportation disruptions will tighten the market’s supply and demand.”

Three weeks in, the Iran conflict shows no signs of slowing, and the Strait of Hormuz—the world’s most critical shipping passage for energy—remains effectively stalled. Normally, about 15 to 20 million barrels of oil pass through this 21-mile-wide waterway daily. Iran’s Islamic Revolutionary Guard Corps has declared it will not allow “a single drop of oil” to pass.

Iran’s Foreign Minister Araghchi previously stated that the war’s end depends on two conditions: ensuring that the conflict does not recur and paying reparations. He also said Iran is ready to dialogue with countries willing to discuss safe passage for its ships through the Strait, and several countries have contacted Iran to request guarantees for safe passage. Ultimately, the decision rests with Iran’s military.

If the strait remains blocked, Wall Street strategists generally believe that international oil prices will continue to rise and stay at historic highs for a longer period. The market has already begun seriously discussing $150, with $150 now considered a “mainstream institutional stress test zone,” while $200 remains a “market hot topic” as an “extreme tail scenario.” The key question is not whether prices will go higher than $100, but how long the Strait of Hormuz blockade will last and whether regional capacity damage will escalate from shipping disruptions to more persistent infrastructure damage. Brent has already risen back above $100, with a monthly increase of over 40%, indicating market pricing has shifted from “short-term geopolitical premium” to “sustained supply shock.”

Wood Mackenzie’s March 10 report explicitly states that the current Iran conflict has reduced Gulf oil and oil product supplies by about 15 million barrels per day. To rebalance the approximately 105 million barrels per day of global demand, Brent crude needs to rise to at least $150 in the coming weeks. The firm even suggests that “$200 oil in 2026 is not impossible.” Senior Wall Street macro strategist Jim Bianco opposes the so-called “declare victory and withdraw” (TACO) approach, arguing it’s a worse choice than maintaining current actions. His reasoning is based on structural risks: if the U.S. withdraws without resolving the Strait of Hormuz issue, Iran could gain long-term control over the global energy supply, enabling it to punish the global economy with $200 per barrel oil for an extended period.

The “Super Central Bank Week” is arriving! Under the pessimistic outlook of “stagflation,” what viewpoints will central bank officials release?

Last week, two key U.S. inflation indicators sent the same message: inflation remains stubbornly above the Fed’s 2% target, and recent international oil price surges due to Middle East geopolitical turmoil have heightened global concerns about “stagflation.” This is why the 10-year U.S. Treasury yield, known as the “global asset pricing anchor,” has recently surged. For the Fed and other major central banks, “stagflation” remains the most difficult long-term macroeconomic challenge.

Janus Henderson Investors’ Global Credit Head John Lloyd said: “Looking ahead, the risk to inflation remains skewed to the upside. The recent sharp rise in oil prices increases the likelihood that inflation will stay high for a longer period.”

However, for the Fed, the good news is that despite high inflation, price pressures have not surged dramatically. Overall and core CPI and PCE readings are either flat or slightly higher than the previous month. But these data cover periods before the Middle East conflict erupted—specifically, CPI for February and PCE for January—so they predate the roughly 50% increase in oil prices.

Market observers generally worry that the U.S. is entering a stagflation period. Oil prices have risen 50% in the past month, inflation remains high, yet February employment data showed a decline of 92,000 jobs, and Q4 GDP growth cooled more than expected.

Therefore, in the context of “stagflation,” statements from the Fed and other global central banks on monetary policy and economic outlooks this week are crucial. The Fed, ECB, BoE, and BoJ will all release interest rate decisions, with markets closely watching the Fed’s dot plot for rate cuts and the BoJ’s potential rate hike. Meanwhile, the Reserve Bank of Australia, Bank of Indonesia, and Banco Central do Brasil will also speak, testing the foreign exchange and bond markets.

ANZ analysts said: “The dollar has strengthened due to its safe-haven appeal, especially with oil prices rising, which benefits energy-exporting countries like the U.S. The market’s worries about Fed rate cuts are intensifying, and rising oil prices increase inflationary pressures.”

Rate futures traders generally expect the Fed to keep rates steady, but the updated dot plot may show only one rate cut this year—significantly less than previous market expectations. Over the two-day meeting, Fed officials will assess the impact of the energy shock on inflation and growth, and the Fed will also release its latest economic projections.

Japan and the Eurozone are likely to hold rates steady, but the price risks from energy could bring the April rate hike back into focus for the Bank of Japan. Recent revisions by Citi and Deutsche Bank economists suggest the RBA may hike this week.

“The AI Bull Market” reaches a critical validation point.

For the U.S. stock market and MSCI global indices, which have hit new highs and entered a new long-term bull phase, the “AI investment theme” has been the core and most powerful bullish driver in recent years. As long as this “AI faith” wave continues to burn hot and sweep through global markets, the bull market in U.S. and worldwide stocks is expected to persist with vigorous momentum.

The S&P 500 has gained about $30 trillion in market value over the past three years during this “super bull market,” largely driven by the world’s largest tech giants (the seven major U.S. tech firms) and benefiting significantly from massive investments in AI infrastructure—such as chip companies like Micron, TSMC, Broadcom; storage giants like SanDisk, Western Digital, Seagate; and power suppliers like Constellation Energy.

Under the dominance of “AI faith,” large-scale capital flows related to AI—focused on AI computing infrastructure and AI-driven revenue—are concentrated in these hottest investment areas. This “AI faith” faces a “super big test” this week, and the overall result will have an unprecedented impact on the major bull trend of U.S. and global stock markets.

This week, the “super big test” around “AI faith” centers on whether Nvidia’s GTC and OFC will deliver groundbreaking “epoch-making” AI GPU and CPO architecture performances and broader compatibility, as well as the earnings and future guidance of Alibaba, Tencent, and Micron—the three giants of Chinese tech and storage chips. The AI computing narrative and AI application prospects face a major challenge. The demand for high-performance HBM, enterprise DDR, and enterprise SSD storage components, driven by AI infrastructure, is also under scrutiny.

Nvidia’s GTC conference will be held from March 16-19 in San Jose, USA, with CEO Jensen Huang’s keynote speech highly anticipated. GTC is Nvidia’s premier global conference on AI and high-performance computing. The company is expected to announce next-generation GPU architectures and superchips. Key expectations include: an earlier mass production of Rubin and Rubin Ultra chips, and a focus on Nvidia’s next-gen architecture—Feynman.

As AI computing demand continues to explode, traditional copper cables at 800G and above are nearing physical limits, making optical interconnect systems the key factor in AI infrastructure performance. Therefore, the OFC conference’s core topics are the progress of 1.6T optical module mass production and the industrialization of Co-Packaged Optics (CPO). Major players like Nvidia, Google, and Broadcom will gather. Bank of America projects 2026 as the year for CPO mass production validation, with the 800G optical module market expected to surge nearly tenfold.

Compared to the macro narrative of AI application prospects, the market is now more focused on whether enterprise or government cloud AI infrastructure demand remains robust, and on the actual revenue, profit growth, margin improvements, and ROI driven by innovative AI technologies. These are the key indicators in the upcoming earnings reports of Chinese tech giants and memory semiconductor leaders.

Micron will announce its Q2 FY2026 results after the U.S. market closes on March 18. Wall Street’s consensus expectations are very high: revenue around $19.15 billion, adjusted non-GAAP EPS between $8.50 and $8.59. Based on current expectations, this implies a year-over-year revenue increase of about 137.8% and a non-GAAP EPS surge of approximately 445%. In other words, the market anticipates not just “moderate growth” but a breakout earnings report, driven by relentless demand for storage chips and cloud AI computing amid the AI data center boom.