A Worldwide Wave of Green
In a remarkable display of synchronized optimism, equity markets around the world surged in a broad relief rally driven by positive geopolitical developments out of the Middle East. Crude oil prices fell significantly, and every major market across a watchlist spanning some 50 different countries closed in the green — a rare moment of universal strength that underscored just how deeply geopolitical risk had been weighing on investor sentiment.
International ETFs were particularly well bid. The South Korean ETF (EWY) climbed roughly 10% on the back of a 7% overnight jump in the KOSPI, fueled by the usual heavyweights — Samsung and SK Hynix. It is worth remembering that the KOSPI had been the world's best-performing index before the conflict began, only to stumble over the past month on fears of higher oil prices. The emerging market ETF (EEM) gained more than 5% intraday, while the India ETF (INDA) added over 3%.
Asia's Vulnerability and the Energy Factor
The strength in Asian equities is especially notable given the region's structural vulnerability compared to the United States when it comes to energy security. Countries across Asia are heavily dependent on energy imports from the Middle East, which means any de-escalation in that region disproportionately benefits their markets. Investors were clearly cheering the easing of tensions, though the durability of this rally remains an open question.
China's Push for Tech Self-Sufficiency
Beyond the geopolitical tailwinds, China's rally had its own catalyst. Alibaba surged more than 5% after announcing the launch of a new data center in southern China — one built on 10,000 of its own proprietary chips rather than Nvidia's. This development is being closely watched as a barometer of China's progress toward technological self-sufficiency, a strategic priority that has taken on heightened importance amid ongoing chip export restrictions. The news appeared to lift other Chinese technology names as well, suggesting the market views domestic chip development as a meaningful inflection point for the sector.
Earnings Season and the Return of Stock Picking
As the geopolitical macro trade begins to take a step back, markets are about to enter the heart of earnings season. Over the next couple of weeks, individual company results should drive greater dispersion among stocks — separating winners from losers in a way that the recent "correlation one" environment, where everything moved in lockstep with geopolitics, had suppressed. For active stock pickers, this is welcome news. Fundamentals, rather than headlines, should start to matter again.
Inflation Data and the Fed's Dilemma
On the economic data front, attention is turning to the PCE price index — the Federal Reserve's preferred gauge of inflation — with the February reading due imminently. While this data is admittedly somewhat stale given it predates the conflict, it still matters. If core inflation surprises to the upside even before the geopolitical shock hit, it would be a troubling signal for markets hoping for rate relief. Forecasts suggest inflation was already running elevated and above the Fed's 2% target prior to the conflict.
The silver lining is that falling oil prices and easing expectations for rate hikes are providing some comfort, even amid lingering skepticism. Meanwhile, jobless claims data will offer a read on labor market resilience — a critical input for a Fed balancing both sides of its dual mandate. So far, the jobs picture has been stable enough to give policymakers room to stay focused on inflation, but that equilibrium could shift quickly depending on how events unfold from here.
Looking Ahead
The coming weeks will offer substantially more information for markets to digest. Earnings reports will reveal how companies are navigating the current environment, while inflation and employment data will shape expectations for monetary policy. For now, the global relief rally is a welcome reprieve, but the real test lies in whether the underlying fundamentals — corporate earnings, price stability, and labor market health — can sustain the momentum once the geopolitical fog lifts.