Global Markets
Global equities faced significant headwinds last week as escalating conflict in the Middle East and surging energy prices weighed heavily on investor sentiment. The S&P 500 fell 1.5 percent, the Nasdaq 100 dropped 1.8 percent to six-month lows, and the Dow Jones declined 0.8 percent, marking the S&P 500’s fourth consecutive weekly loss, the first such streak since March 2025. The Nasdaq now trades below its November lows.
The week’s pivotal event was the Federal Open Market Committee (FOMC) meeting on Wednesday. The Federal Reserve opted to hold the federal funds rate at 3.5 to 3.75 percent, with Chair Jerome Powell noting that inflation remains above target and that the conflict in Iran has added uncertainty to the economic outlook. While the Fed’s median forecast still anticipates one rate cut in 2026, the number of officials expecting rates to remain unchanged for the year has increased. Inflation projections for 2026 were lifted to 2.7 percent, with GDP growth forecast at 2.4 percent. Treasury yields rose sharply, with the two-year yield climbing to 3.88 percent and the ten-year to 4.39 percent, reflecting the market’s adjustment to higher inflation expectations.
Market sentiment has shifted dramatically in recent weeks. The probability of a Fed hike is now 19.8 percent, while the likelihood of a rate cut has fallen to just 26 percent, a stark reversal from expectations of three cuts earlier this year.
Australian Markets and ASX 200
Domestically, the ASX 200 closed Friday at 8,428, down 0.82 percent on the day and 2.19 percent for the week, marking its lowest finish in four months and a third consecutive weekly decline. Since the Middle East conflict escalated in late February, roughly $250 billion in market value has been erased.
Tuesday’s Reserve Bank of Australia meeting delivered a 25 basis point rate hike to 4.10 percent, narrowly passing in a 5 to 4 vote. The split prompted a brief relief rally, particularly in real estate and financials, as investors speculated the tightening cycle may be approaching its peak.
Sector performance was mixed. Energy led gains, alongside Utilities, Staples, Telcos, and Financials, while Materials continued its aggressive unwind, down 3.2 percent year to date. Technology and Consumer Discretionary stocks faced notable pressure. Gold experienced its worst week in six years, declining roughly 7 percent to trade near US$4,650 per ounce as rising oil and gas prices increased inflation expectations and reduced demand for non-yielding assets. The AUD/USD remained near 0.7001, supported by the RBA hike, while Brent crude approached US$98 per barrel following attacks on Persian Gulf energy infrastructure.
A Message From Our Founder
History shows that geopolitical conflict often rattles markets in the short term before conditions stabilise. However, the current disruption to global energy supply is feeding directly into business costs, slowing economic growth, and challenging central banks worldwide.
In the US, what began as a cycle pointing toward rate cuts has almost completely reversed, with the Fed now on hold and potential hikes back on the table. In Australia, the need for rate increases to control inflation was already present, and the conflict has intensified this pressure. Markets are reacting accordingly, with the ASX entering correction territory and valuations coming under pressure.
Given these conditions, we remain cautious. We are not yet seeing this as a buying opportunity and are prioritising defensive positioning and assets uncorrelated with broader market movements. In times of uncertainty, capital preservation remains a key strategy while we wait for greater clarity.
General Advice Warning
This article is prepared by Barker Wealth Pty Ltd (AFSL 418376) and is for general information purposes only. It does not take into account your personal objectives, financial situation, or needs and therefore should not be considered personal financial advice. Before making any investment decision you should consider whether the information is appropriate for your circumstances and seek professional advice where necessary. Past performance is not a reliable indicator of future performance.