(Adds close of European markets)
* Oil prices ease further after Bessent comments
* Central bank meetings eyed for inflation views
* US stocks higher, led by AI-related companies
NEW YORK, March 16 (Reuters) – Global stocks rallied on Monday as oil prices pulled back, though a previous surge in crude prices is likely to sway the inflation outlook and cause most central banks to hold rates steady at their policy meetings this week. Israel said it has detailed plans for at least three more weeks of war as its military pounded sites across Iran overnight, while Iranian drone attacks temporarily shut Dubai airport and hit a key oil facility in the United Arab Emirates. U.S. President Donald Trump repeated his call for help to unblock the Strait of Hormuz after some vessels sailed through it. In addition, Treasury Secretary Scott Bessent said the U.S. was “fine” with some Iranian, Indian and Chinese ships going through the strait for now, adding that any action to alleviate higher prices would depend on how long the war on Iran lasts. U.S. crude fell 5.13% to $93.65 a barrel and Brent fell to $100.28 per barrel, down 2.77% on the day. Both Brent and U.S. crude have surged nearly 40% in March.
This jump in oil prices and its potential to boost inflation have led markets to recalibrate expectations for easing policies from global central banks this year. Markets are currently pricing in about 25 basis points of cuts from the U.S. Federal Reserve by the end of the year, and nearly 40 basis points of hikes from the European Central Bank, according to LSEG data.
On Wall Street, U.S. stocks were higher, led by AI-linked names such as Nvidia and Meta Platforms. Meta shares were up 1.8% after Reuters reported the social media giant plans to lay off 20% or more of its workforce while Nvidia gained 2.8% as CEO Jensen Huang began to detail the company’s hardware and software plans at its annual developer conference.
“Nice to see tech bounce back here, it really is the whole guessing on the de-escalation of Iran and the energy concerns,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
“Certainly in the near term it’s the energy concerns and then longer-term it’s what are you going to do about this very large country that’s a big part of the Middle East?”
The Dow Jones Industrial Average rose 342.00 points, or 0.73%, to 46,900.47, the S&P 500 climbed 65.24 points, or 0.98%, to 6,697.43 and the Nasdaq Composite jumped 273.44 points, or 1.24%, to 22,378.46. Each of the three indexes was on pace for its biggest daily percentage gain since February 6. MSCI’s gauge of stocks across the globe advanced 10.97 points, or 1.10%, to 1,010.13, and was also on course for its biggest daily percentage gain since February 6. The pan-European STOXX 600 index closed up 0.44% to snap a three-session streak of declines. Commerzbank’s shares shot up about 9% after Italy’s UniCredit launched a bid for an additional stake in the German lender.
Central banks in the U.S., Britain, euro zone, Japan, Australia, Canada, Switzerland and Sweden will this week hold their first meetings since the start of the Iran war, and investors will look for clues on how rising crude prices could impact the interest-rate path.
The sharp shifts in central bank expectations have led to large moves in government bonds.
The yield on the benchmark U.S. 10-year notes dropped 6.1 basis points to 4.224%, though it is still up about 26 bps for March, as market participants dialed back the timing and magnitude for expected rate cuts. The U.S. Fed is largely expected to hold rates steady at its policy announcement on Wednesday, and policymakers are more likely to strike a cautious if not outright hawkish tone this week due to the current oil shock.
There have been sharper moves in rate-sensitive, shorter-dated yields, and two-year German yields have jumped 40 basis points this month, while the equivalent British gilt yield has surged 58 bps. A cautiously steady outcome is expected from the other central bank meetings, excluding the Reserve Bank of Australia, which is seen likely to raise its cash rate a quarter point to 4.1%, as it battles resurgent inflation at home.
The heightened volatility in markets has tended to benefit the U.S. dollar as a safe haven. The United States is also a net energy exporter, giving it a relative advantage over Europe and much of Asia, which are net importers.
But the dollar index, which measures the greenback against a basket of currencies, dropped 0.66% to 99.67, after touching a 10-month high on Friday, with the euro up 0.93% at $1.1522.
(Reporting by Chuck Mikolajczak in New York, additional reporting by Wayne Cole in Sydney, Alun John in London, Johann M Cherian and Utkarsh Tushar Hathi in Bengaluru; Editing by Shri Navaratnam, Kate Mayberry, Thomas Derpinghaus and Pooja Desai)
