ECB Watch: Energy Shock Won't Derail Policy Path, Says Nomura
Analysts at Nomura predict the European Central Bank will maintain its current policy trajectory, looking past potential energy price volatility stemming from Middle East instability.
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Analysts at Nomura predict the European Central Bank will maintain its current policy trajectory, looking past potential energy price volatility stemming from Middle East instability.

Global markets face a sharp sell-off as escalating Middle East tensions drive a flight to the US Dollar, crushing equities and sending Gold plunging over 4% amid rising yields.

Reports of a drone strike targeting the U.S. Embassy in Riyadh by Iran have sparked immediate geopolitical concerns, likely driving volatility in crude oil and safe-haven assets. Markets are expected to price in significant risk inter-premiums as hostilities in the Middle East intensify.

Eurozone inflation remains stubborn at 1.9%, complicating ECB policy as energy risks mount. Meanwhile, a "value" narrative emerges in China, with fund managers calling local equities the cheapest mainstream asset despite AI bubble concerns.

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A severe escalation in the Middle East has triggered physical energy disruptions, with Iraq suspending production at its largest oil field and Qatar's LNG exports stalling. Morgan Stanley warns that prolonged disruption could see European gas prices double to €100.

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