Finsphere
Issue 25 | March 2026 
Your Monthly Guide on Global and Local markets from our Business Head’s Desk. 
Markets Retreat as Geopolitical Risks Escalate
Middle East conflict, oil supply disruptions and tariff uncertainty trigger a global risk-off sentiment.
Dear Clients and Stakeholders,
The turn of the month has brought with it caution to global markets following the escalations in the conflict between US-Israel and Iran in the Middle East. Investors, globally, took a risk off approach across asset classes which resulted in high profit taking in Equities, Gold, Silver and US bond yields. With President Trump suggesting the escalations could last for weeks, global markets are set for a tumultuous period.
The conflict in Middle East has resulted in a practical shutdown of Strait of Hormuz, a critical chokepoint in global energy supply chain. In fact, the strait carries one fifth of global oil supply apart from large quantities of gas. Further, major oil supplying nations in the region announced curbs in production as the conflict spread across the region. This has resulted in a surge in oil prices globally with the impact in Asia, which sources nearly 60% of its oil needs from the Middle East, particularly acute. The escalations in the Middle East have reintroduced fears of inflation with the central banks across regions casting a keen eye on the ongoing developments.
While on the tariff front, the year began with hopes that uncertainty which had dominated the headlines for much of the year had seemingly settled. February saw another twist in the tale after the US Supreme Court struck down tariffs imposed by President Trump under the International Emergency Economic Powers Act (IEEPA) as illegal adding confusion to the trade deals concluded by the Trump administration. President Trump swiftly announced tariffs of 10% under Section 122 of the Trade Act 1974 before subsequently revising it to 15%. However, the US Customs department notified that global tariff would be 10%. These developments have resulted in confusion among US’s trading partners who have adopted a ‘wait and watch’ approach towards trade deals.
Against this backdrop, global equities plunged with all major indices posting declines in the week since escalations in the Middle East. In the US, the S&P 500 was down -2.02% w/w, the Nasdaq Composite declined -1.24% w/w and the Russell 2000 fell -4.07% w/w. In Europe, the FTSE 100 declined 5.74% w/w, the CAC 40 fell 6.84% w/w and the DAX plunged 6.70% w/w. In Asia, South Korea’s KOSPI plummeted 10.56% w/w but continued to remain the best performing index with YTD gains of 32.53% while Japan’s Nikkei 225 fell 5.49% w/w, Hong Kong’s Hang Seng Index declined 3.28% w/w. India’s NIFTY 50, meanwhile, fell 2.89% w/w (-6.43% YTD).
United States
A slowdown in growth momentum amid renewed labour market slack
The US economy showed signs of moderating momentum toward the end of 2025. Advance estimates indicated GDP growth slowed to an annualized 1.4% in Q4CY25, sharply lower than the 4.4% expansion in Q3, reflecting weaker consumer spending, a contraction in government expenditure due to the government shutdown, and a decline in exports. On a full-year basis, the US economy expanded 2.2% in 2025, lower than 2.8% in 2024, suggesting a gradual normalization in growth momentum.
Inflation data presented a mixed picture. Headline CPI slowed to 2.4% in January, its lowest reading since May, while core CPI moderated to 2.5%, the lowest since March 2021. However, PCE, the Federal Reserve’s preferred gauge presented a contrasting picture, with PCE inflation rising 2.9% year-on-year in December and core PCE accelerating to 3.0%, suggesting underlying inflationary pressures remain somewhat sticky. Meanwhile, producer prices rose 0.5% month-on-month in January, with services prices rising sharply even as goods prices declined due to falling gasoline costs.
Labour market conditions displayed renewed softness. The US unemployment rate rose to 4.4% in February 2026, up from 4.3% in January and slightly above market expectations, inching closer to November’s four-year high of 4.5%. Meanwhile, the US economy shed 92K jobs in February 2026, the most in four months, following a 126K rise in January and much worse than forecasts of a 59K gain.
Industrial production rose 0.7% month-on-month in January, supported by widespread gains across manufacturing and a strong rise in utilities output, while capacity utilization increased to 76.2%. In contrast, consumer activity softened slightly, with retail sales declining 0.2%, marking the first decline since October. Meanwhile, housing market momentum remained subdued, with house prices rising only 0.1% month-on-month in December, though prices remained 1.8% higher year-on-year, suggesting continued supply constraints.
On the trade front, the US trade deficit widened sharply to $70.3 billion in December, significantly above the previous month’s $53 billion deficit. The widening was driven by a 1.7% decline in exports alongside a sharp 3.6% increase in imports, particularly computer accessories. For the full year, the US recorded a $901.5 billion trade deficit, broadly in line with the previous year, and among the largest since 1960 highlighting the persistent structural imbalance in US trade.
The renewed softness in labor market data, coupled with concerns over resurging inflationary pressures driven by rising oil prices, has complicated the Federal Reserve’s decision on whether to pursue further interest rate cuts to stimulate an economy that is showing signs of slowdown in momentum.
Eurozone & UK
Inflation continues to ease across Europe amid fragile growth conditions
In the Euro Area, inflationary pressures eased at a consumer level even as pipeline pressures persisted. Consumer price inflation slowed to 1.7% in January, its lowest level since September 2024 while core inflation also eased to 2.2%, the lowest since October 2021. Industrial producer prices in the Euro Area rose 0.7% month over month in January 2026, reversing a 0.3% decline in December and surpassing market expectations of a 0.2% increase. Meanwhile, unemployment rate edged down to an all-time low of 6.1% in January from 6.2% in the previous month indicating resilient labour market situation.
However, activity indicators remained soft, with industrial production contracting 1.4% month-on-month in December, marking the steepest decline since April 2025 and reversing three consecutive monthly gains. Retail sales growth also declined 0.1% month-on-month in January, down from 0.2% in the previous month, indicating weaker consumer momentum. On the trade front, the Euro Area recorded a €12.6 billion trade surplus in December, slightly lower than the €13.9 billion surplus recorded a year earlier. Exports rose 3.4% year-on-year while imports increased at a faster pace of 4.2%.
In the United Kingdom, the macroeconomic environment remained mixed. Industrial production declined 0.9% month-on-month in December, reversing the previous month’s gains and marking the first such decline since September. However, consumer activity improved modestly, with retail sales rising 1.8% month-on-month in January, the strongest increase since mid-2024, supported by stronger demand in non-food retailing and online sales. Labour market conditions softened further in the three months to December, with the unemployment rate rising to 5.2%, the highest since early 2021, despite modest growth in overall employment. Inflation dynamics continued to ease with consumer price inflation slowing to 3.0% in January, down from 3.4% in December.
Overall, while easing inflation across both the Euro Area and the UK provides some policy flexibility. Indicators of business activity such as industrial production and retail sales highlighted that growth conditions across Europe remains fragile.
Asia
China and Japan battle slowdown in economic growth momentum
China’s macroeconomic environment continues to reflect subdued domestic demand and persistent deflationary pressures. Consumer price inflation slowed sharply to 0.2% in January, its lowest level since October, driven primarily by falling food prices and deeper declines in transport costs. Producer prices also remained in contraction for a 40th consecutive month, declining 1.4% year-on-year, although the pace of decline moderated compared with December. Monetary policy remained steady, with the People’s Bank of China keeping the one-year LPR at 3.0% and the five-year LPR at 3.5% for a ninth consecutive month, signaling a cautious approach toward further easing amid concerns about financial stability and structural imbalances in the economy.
Japan’s macro backdrop remained mixed. Economic growth remained weak, with GDP expanding only 0.2% annualized in Q4, following a contraction in the previous quarter and significantly below market expectations. Industrial activity also remained subdued, with industrial production declining 0.1% month-on-month in December, marking a second consecutive monthly contraction. Inflation continued to moderate.
Core CPI slowed to 2.0% in January, the weakest pace in two years and aligned with the Bank of Japan’s inflation target, while producer price inflation eased to 2.3%, reflecting moderating input costs across several manufacturing sectors. Meanwhile, trade dynamics improved somewhat, with exports rising 16.8% year-on-year in January, though Japan still recorded a 1.15 trillion-yen trade deficit.
Overall, China continues to battle subdued domestic demand. In Japan, while economy remains constrained by weak growth momentum the strong parliamentary mandate secured by Prime Minister Sanae Takaichi’s coalition has strengthening expectations of continued fiscal expansion and pro-growth economic policies.
India’s Economic Pulse:
Strong growth momentum persists despite rising external pressures
India’s macroeconomic indicators continue to reflect strong growth momentum. Real GDP expanded 7.8% year-on-year in Q3FY26, moderating slightly from 8.4% in the previous quarter but exceeding market expectations. The expansion was driven primarily by robust private consumption growth of 8.7%, supported by government tax cuts and fiscal measures aimed at sustaining consumer demand. Despite the moderation in government expenditure and fixed investment growth, India remained the fastest-growing major economy globally.
Inflationary pressures continued remain within the RBI’s tolerance band of 2-4% after several months below the lower threshold. Consumer price inflation rose to 2.75% in January with the increase driven largely by a rebound in food inflation following the revision of CPI weights under the new consumption survey. Meanwhile, wholesale price inflation accelerated to 1.81%, the fastest pace since March 2025, reflecting stronger manufacturing inflation and rising food prices even as fuel costs declined.
Labour market conditions showed some signs of softness. Unemployment increased to 5.0% in January, driven by rising joblessness across both urban and rural areas, with urban unemployment rising to 7.0%. Meanwhile, industrial production in India rose 4.8% year-on-year in January while infrastructure output which accounts for nearly 40% of industrial production grew 4.0% year-on-year, supported by strong production in steel and cement, although energy-related sectors such as crude oil and natural gas continued to contract.
On the trade front, India’s merchandise trade deficit widened sharply to $34.7 billion in January, driven by a significant increase in imports, particularly gold and silver. Imports surged 19.2% year-on-year, while exports grew only modestly by 0.6%, reflecting continued external headwinds.
Overall, India’s macroeconomic landscape reflects an optimistic trajectory with underlying industrial strength, robust domestic demand, and supportive policy measures - such as the introduction of GST 2.0, direct tax rate cuts, interest rate cuts along with a pro-growth stance of the RBI - anchoring the economy. Further, the back-to-back trade deal announcements is expected to add to robust domestic demand.
Conclusion
Overall, the global macroeconomic environment has entered a period of heightened uncertainty driven primarily by geopolitical risks. The escalation of the conflict in the Middle East has introduced a fresh supply-side shock through surging energy prices, raising renewed concerns about inflation at a time when growth momentum across major economies is already showing signs of moderation. At the same time, policy uncertainty surrounding US trade tariffs has added another layer of complexity to the global economic outlook, with trading partners adopting a cautious stance toward future trade negotiations.
Against this backdrop, India stands out for its relative stability.
At Chola Securities, we remain steadfast in our commitment to helping you navigate these complexities with clarity and foresight. As always, we aim to align your investments with evolving opportunities while ensuring resilience against emerging headwinds.
We sincerely thank you—our valued clients and investors—for your continued confidence and partnership. Together, we look forward to embracing the challenges and opportunities of the months ahead, ensuring sustained growth and success.
Warm Regards,
N Senthilkumarh
President, Chola Securities