Markets Cheered by News of 15-Point U.S. Peace Plan to End Middle East War
March 25, 2026
So far, Iran shows little sign of deescalating, and the all-import Strait of Hormuz remains effectively shut to shipping traffic. Nevertheless, as of 08:15 EDT, the dollar had risen overnight by 0.5% against the Australian dollar, 0.3% relative to the kiwi, 0.2% versus the yen and Canadian currency, and 0.1% vis-a-vis the euro, Swiss franc, Mexican peso, Turkish lira and sterling. Major U.S. stock indices in futures trading had climbed around 0.9%, and that margin of gain extended marginally further in the ensuing hour. Advances among other stock markets around the world this Wednesday amounted to 2.9% in Japan, 2.8% in reopened Indonesia, 2.5% in Taiwan, 1.9% in Australia, 1.8% in New Zealand, and around 1.5-2% in the major European exchanges. Ten-year sovereign debt yields had dropped by 11 basis points in the U.K., ten bps in France and Italy, nine bps in Australia, seven bps in Germany but just 5 bps in the United States.
West Texas Intermediate oil had been down 5.7% but shows a net loss of 4.3% an hour later and after the release of U.S. February import and export price figures, which revealed heated up pressures even before the war began. The latest gold and silver price readings show advances of 1.9% and 5.2% so far today, while Bitcoin is 1.5% firmer.
A 1.3% monthly jump in U.S. import prices last month was the largest since the month after Russia initially invaded Ukraine and swung the year-on-year measure of import price inflation from -0.1% in January to a one-year high last month of 1.3%. Fuel costs shot up 3.8% on month, but the really revealing intensification of imported inflation occurred in non-fuels, which posted a monthly 1.1% increase on top of a 0.8% rise in January and doubled the year-on-year pace to 2.5%, most in 41 months. Export price growth in February rose 1.5% on month (a 45-month high) and 3.5% on year (a 5-month high).
Today’s other significant U.S. data report showed a significantly reduced and smaller-than-expected current account deficit last quarter of $190.7 billion, equivalent to -2.4% of GDP. $190.7 billion followed $239.1 billion in the prior quarter and a record $438 billion in the first quarter of last year. The full-2025 current account deficit of $1.12 trillion equaled 3.6% of GDP. This is the fifth straight year with a current account deficit ratio above 3.0% but it was down from 4.0% in 2024. While progressively diminishing in size over the course of 2025, the dollar amount of the current account imbalance for the year as a whole was little changed from its size in 2024, and between end-2024 and end-2025, the U.S. currency depreciated by 11.8% against the euro, 12.6% versus the Swiss franc, 7.1% relative to sterling and 4.6% against northern neighbor, the Canadian dollar.
Central bank interest rates have been kept unchanged after policy reviews in Chile, Georgia and Sri Lanka. The respective current rate levels of 4.5%, 8.0% and 7.75% are down from previous cyclical peaks of 11.25%, 11.0% and 15.5%. Officials at each bank must now approach further policy normalization, pending clarification of the impact of the Middle Eastern war on inflation, expected inflation, and economic growth.
Minutes from the Bank of Japan’s January policy review reveal a consensus to gradually raise interest rates assuming that growth and price trends continue to align with official expectations. Given the uncertainty injected by the Middle Eastern war and the facts that the 0.75% interest rate was not changed at either January’s review or the ensuing one earlier this month, the minutes are somewhat outdated. However Governor Ueda has actually become more vocal since January in expressing concern about the yen’s weakness, so it’s fair to assume that the desire to lift interest rates remains strong and will be acted upon when officials better understand the effects of the war on Japanese growth as well as inflation.
Released price data today included
- British consumer price inflation holding steady in February at January’s 10-month low of 3.0%, which is much closer to the low of 1.7% in September 2024 than the peak of 11.1% in October 2022 but still a percentage point above target.
- British producer output price inflation receded to a 10-month low 1.7% last month, while producer input price inflation rose above zero percent to +0.5%.
- Australian CPI inflation eased 0.1 percentage point in February to a 3-month low of 3.7%.
- Swedish producer price inflation, which has been sub-zero percent in 10 of the past 12 reported months, printed at -1.7% in February.
- Spanish PPI inflation of -7.0% in February was its most deflationary in 23 months.
The German IFO Institute’s business climate survey for March showcases the immediate impact of the jump in energy costs and geopolitical uncertainty. A two-index point drop to a 13-month low entirely represented future expectations, as perceived current conditions replicated the prior month’s reading. But all four major sectors took a hit. Services fell to a 15-month low, followed by a 7-month low in construction and 3-month lows in manufacturing and trade. Summarizing the results, the survey’s compiler said, “the war in Iran has put any hope of a recovery on ice for the time being.”
Consumer confidence fell in March to a 10-month low in South Korea and a 2-month low in Sweden but rose to a 3-month high in Brazil.
U.S. mortgage applications last week fell by more than 10.0% for the second week in a row, as the 30-year fixed mortgage rate climbed to a 24-week high of 6.43%.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: British CPI and PPI, Central Bank of Chile, National Bank of Georgia, National Bank of Sri Lanka, U.S. import prices and current account
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