Markets Today: Rate cut hopes wither as Nikkei and Kospi suffer steep weekly losses. NFP data up next

• Japan’s Nikkei and South Korea’s KOSPI suffered their steepest weekly losses in nearly a year
• Crude oil (Brent +17.2%, WTI +20%) logged its sharpest weekly surge since early 2022
• The US Dollar Index (DXY) had its biggest weekly surge since late 2024
• Money markets pivoted to increase bets on potential rate hikes from the European Central Bank (ECB) to combat rising, energy-driven inflation. NFP data ahead.

Most Read: Chart alert: WTI crude oil bullish breakout above $78.10/barrel in play

Japanese equity markets suffered their most significant weekly retreat in nearly a year this Friday as escalating conflict in the Middle East severely restricted transit through the Strait of Hormuz.

This geopolitical friction choked global oil supplies, prompting a widespread flight from risk assets into the safety of cash. While the Nikkei 225 Index managed a slight recovery of 0.6% to finish at 55,620.84 on Friday, the broader picture remained bleak. The benchmark concluded the week with a 5.5% loss, marking its steepest percentage decline since the tariff-induced volatility of April 2025.

Sector performance and energy slump

The broader Topix followed a similar trajectory, gaining 0.4% on the day but ending the week down 5.6%. Energy-related stocks bore the brunt of the market's anxiety:

Energy explorers: One of the worst-performing sectors, down 1.9%.

Inpex: Dropped 1.7%.

Japan Petroleum Exploration: Shed 2.6%.

Oil sector index: Declined 1.2% overall.

Conversely, the technology sector provided a rare bright spot. Following a positive lead from Wall Street, software and IT shares rallied, with Fujitsu and NEC climbing 5.4% and 5.2%, respectively.

Regional Volatility: South Korea's record week

South Korean markets experienced even more dramatic swings, ending a week of extreme volatility with the KOSPI’s largest weekly drop since the onset of the pandemic in March 2020. The index plummeted 10.56% over the five-day period, fueled by a staggering 12% crash on Wednesday before a partial 10% rebound on Thursday. On Friday, the KOSPI remained relatively flat, closing at 5,584.87 as investors engaged in "dip-buying" near the 5,500-point support level.

Strategic Oil Reserves

The regional instability is particularly acute for South Korea, which ranks as the world’s fourth-largest oil importer and relies on the Middle East for 70% of its supply. To mitigate the impact of the Strait of Hormuz disruptions, the South Korean government has announced plans to secure more than 6 million barrels of crude oil from the United Arab Emirates (UAE) to stabilize domestic energy needs.

European equity markets saw a modest recovery on Friday as a temporary reprieve in the surging energy sector bolstered investor sentiment.

The STOXX 50 climbed 0.5% while the STOXX 600 edged up 0.2%, driven largely by gains in the industrial and consumer cyclical sectors. Despite this daily bounce, the broader market remains on edge as the conflict with Iran enters its seventh day, leaving significant geopolitical uncertainty hanging over the region.

Winners and Losers: Sector breakdown

The day's performance was a tale of two halves, with luxury and defense leads offset by a slump in healthcare and tech:

• Luxury & Tech Gains: Market heavyweights like SAP (2%), Siemens (1.4%), LVMH (1%), and Hermes (1%) all trended higher.
• Defense Surge: Ongoing Middle East tensions fueled interest in defense contractors, with Dassault Aviation jumping 4.3%, Rheinmetall rising 3.3%, and Leonardo gaining 2.6%.
• Aviation: Lufthansa shares soared 3% following an earnings report that exceeded analyst expectations.
• The Downside: High-profile laggards included Roche (-2.7%), Novartis (-1.3%), ASML Holding (-1.1%), and Unilever (-0.6%).

While Friday provided some relief, the weekly totals tell a much more somber story. Both major indices suffered their steepest weekly retreats since April 2025.

The week's sharp decline reflects the deep-seated anxiety regarding energy supply chains and the potential for further escalation in the Middle East.

The US dollar maintained a position of strength on Friday, positioning the greenback for its most significant weekly surge since late 2024.

The US Dollar Index (DXY), which tracks the currency against a basket of major peers, edged higher to 99.14, marking a 1.5% increase for the week. This rally came at the expense of other major currencies: the Euro tumbled 1.9% for the week to $1.159, its steepest decline since 2022 while the Yen softened to 157.77 per dollar and Sterling nudged lower to $1.3347.

The primary catalyst for the dollar's dominance is the escalating conflict with Iran, which has sent energy prices soaring and reignited fears of a global inflation resurgence. This shift in the economic landscape has forced traders to aggressively re-evaluate the timing of central bank rate cuts:

Federal Reserve: Expectations for a June rate cut have withered, with the CME FedWatch Tool now pricing in only a 34% probability of easing.

Bank of England: Traders have similarly pared back expectations for rate relief in the UK.

European Central Bank: In a sharp pivot, money markets are now increasing bets on potential rate hikes later this year to combat rising costs.

As investors pivoted toward the dollar and braced for "higher-for-longer" interest rates, the cryptocurrency market experienced a cooling effect. Risk-off sentiment pushed Bitcoin down 0.96% to $70,459.79, while Ether followed with a 1.21% decline, settling at $2,055.42.

Currency Power Balance

The global energy market is currently navigating its most volatile period in years, with crude oil on track for its sharpest weekly surge since the onset of the Russia-Ukraine war in early 2022.

Driven by the widening conflict in the Middle East, Brent crude has skyrocketed 17.2% this week, while West Texas Intermediate (WTI) surged by 20%.

Although prices eased slightly on Friday, with Brent dipping 0.6% to $84.88 and WTI falling 0.8% to $60.40, the decline was largely attributed to a strategic move by Washington. To alleviate immediate supply constraints, the US issued waivers for certain Russian oil purchases, providing a minor relief valve for the parched energy market.

Gold markets saw a defensive rebound on Friday as investors sought out the safety of bullion amidst the escalating geopolitical instability. Spot gold rose 0.8% to $5,117.27 per ounce, recovering from a sharp 1% drop in the previous session.

US gold futures for April delivery followed suit, climbing 1% to reach $5,126.70.

A point that may be worth mentioning, CME Group cut initial margins on gold and silver futures yesterday. This move follows a period of "forced liquidations" where traders were squeezed out of positions. Lowering margins reduces the capital required to hold a contract, which should stabilize the market by inviting speculative buyers back in and thus could provide some support to both Gold and Silver prices.

Read More:

• Chart alert: Why Japan’s Nikkei 225 can stage a minor recovery after its 4-day plunge
• NFP Preview: Jobs to drive volatility amid "operation epic fury" & implications for the DXY, Dow Jones
• Trade Idea: DAX eyes bullish recovery after 6% slide and retest of psychological 24000 handle

As the trading day continues, markets remain cautious, shifting their focus toward upcoming eurozone revised GDP data and some ECB policymaker comments.

Looking ahead to the US session, focus shifts back to US economic data today with the release of the January Nonfarm Payrolls (NFP) and retail sales reports.

While the consensus anticipates a respectable addition of 55,000 jobs following a robust 130,000 increase in January, some analysts are bracing for a softer or even negative reading due to the severe winter weather that gripped the US in late January and early February.

A disappointing figure could trigger a brief dip in the US dollar; however, any losses are expected to be short-lived as the ongoing conflict in the Middle East continues to fuel safe-haven demand.

Markets are also closely watching for a reaction from the Federal Reserve. Governor Christopher Waller, who notably dissented in January in favor of a 25bps cut, is scheduled for a televised appearance at 1:30 PM CET today.

Current expectations suggest he may pivot toward advocating for a "pause" in rate adjustments. Such a stance would likely offer additional support to the greenback, adding another layer to today's complex dollar narrative.

Unless a significant political breakthrough leads to a ceasefire, the dollar appears unlikely to enter a sustained decline. Instead, the global economic story remains dominated by governments struggling to manage the inflationary fallout of record-high energy prices—a scenario that remains fundamentally bearish for global bond markets.

DXY Expected Range: 98.50 – 99.50

Key Support/Resistance: 99.00 remains a critical psychological pivot point.

Verdict: It remains too early for a meaningful sell-off in the dollar given the current "fog of war."

From a technical perspective, the FTSE 100 index has slipeed below both the 100 and 200-day MAs.

Having printed fresh highs on Friday around the 10935 handle the index is experiencing a pullback with the rise in geopolitical risks.

For now though, a deeper pullback to support around the 10233 and 10144 mark cannot be ruled out.

Only a four-hour candle close above the swing high point at 10628 would lead to a change in structure and could lead me to reevaluate my outlook.

Immediate support rests at 10233 before the 10144 handle comes into focus.

Resistance to the upside at 10447 needs to be cleared if bulls are to make a run for the 100-day MA at the 10628 handle and beyond.

FTSE 100 Index Daily Chart, March 6, 2026

Follow Zain on Twitter/X for Additional Market News and Insights @zvawda