Week ahead: Markets await Trump’s Iran deadline, the RBI rate decision and US inflation

Weekly recap:

US global stocks recap

US stock indices ended the volatile, holiday-shortened week higher amid tentative signs of de-escalation in the Middle East conflict. The Nasdaq Composite led the gains, recording its best week since November, while the S&P 500 and the Dow Jones rose 3.3% and 3.0%, respectively.

Major US data/themes

Equities rallied after President Trump signalled a growing willingness to de-escalate the situation in the Middle East. However, in a speech on Wednesday, Trump also warned that military operations could intensify over the next two to three weeks, pushing oil prices higher and dragging on risk sentiment on Thursday.

Labour market data also helped support sentiment. Nonfarm payrolls showed that the US economy added 178,000 jobs in March, following a downwardly revised 133,000 decline in February, while the unemployment rate unexpectedly fell to 4.3%. The data reinforced the view that the Federal Reserve can remain focused on inflation, rather than being forced to respond urgently to labour market weakness.

Gold moves

Gold rose 4% last week, marking its strongest weekly gain since 18 January. The precious metal initially gained at the start of the week on hopes of a possible de-escalation in Iran, before giving back part of those gains on Thursday as oil prices surged and Treasury yields moved higher again.

Despite last week’s rebound, gold still fell more than 11% in March, as rising yields and a stronger US dollar prompted markets to scale back expectations for Federal Reserve rate cuts. Looking ahead, the outlook for gold remains highly sensitive to both geopolitical headlines, notably Trump’s Monday deadline for Iran to reopen the Strait of Hormuz, and US inflation data.

If Treasury yields continue to rise, that is likely to limit the upside for gold. Similarly, hotter-than-expected inflation could reinforce the view that the Fed will keep rates higher for longer, which would also be a headwind for the precious metal.

Oil moves

Oil prices jumped more than 12% last week, although the majority of those gains came on Thursday after markets reacted to President Trump’s Wednesday evening speech. In that address, Trump dashed hopes of a near-term de-escalation with Iran, instead warning that US military action could intensify over the next two to three weeks, including threats to strike Iranian infrastructure more aggressively.

That shift in tone sharply increased fears over supply disruption and sent crude prices higher. Notably, WTI outperformed Brent, reflecting growing concern over the potential implications for global supply and regional energy flows.

Looking ahead, developments in Iran will remain the dominant driver, with Trump’s Monday deadline for Iran to reopen the Strait of Hormuz a key focus. Any renewed signs of escalation are likely to keep oil prices elevated and could create further pressure on energy-importing economies such as India and Pakistan.

Indian markets

Indian markets fell for a sixth straight week last week, reflecting persistent weakness in risk sentiment. The Nifty 50 ended the week near 22,713, with broader sentiment remaining cautious despite a sharp intraday recovery in the second half of the week as the Indian rupee rebounded from a record low.

That rebound offered some short-term relief, but the broader macro backdrop remains challenging, particularly amid ongoing concerns surrounding the Middle East conflict and elevated oil prices.

Foreign institutional investors (FIIs) ended FY2026 on a bearish note, selling ₹1.88 lakh crore, and carried that trend into FY2027, with outflows of ₹18,262 crore at the start of the new fiscal year. The persistence of foreign outflows continues to weigh on sentiment and highlights broader investor caution towards Indian assets.

Meanwhile, domestic institutional investors (DIIs) continue to provide strong support to the market, largely absorbing the selling pressure and purchasing ₹ 1.28 billion during the month.

Key Indian market drivers: This week, attention will centre on the Middle East conflict, the Reserve Bank of India rate decision, as well as key US inflation data, which could have implications for risk sentiment, capital flows, and the rupee.

USD/INR fell 2.19% last week as the Indian rupee recovered sharply from a record low after the Reserve Bank of India cracked down on speculative positioning against the currency.

Pakistan markets

The Pakistan Stock Exchange (PSX) remained under pressure last week, falling for a tenth consecutive week amid a volatile backdrop driven by surging domestic fuel prices, tightening global oil supply, and escalating tensions in the Middle East.

Investor sentiment was hit by a sharp increase in petroleum prices, which has raised concerns over inflation, import costs, and the broader fiscal outlook.

Concerns were compounded by reports that Pakistan is set to repay $3 billion to the UAE this month, after a financing facility was reportedly not rolled over.

Recent data also showed that CPI inflation rose to 7.3% year-on-year in March, its highest level since August 2024, up from 7.0% in February, with fuel prices accounting for a large part of the increase.

Meanwhile, the broader macro picture also remained mixed as GDP growth for Q2 FY26 came in at 3.89% and the trade deficit widened to $2.7 billion in March.

Looking ahead, market sentiment is likely to remain closely tied to geopolitical developments, oil price volatility, and the start of the March-quarter corporate earnings season.

The Pakistani rupee remained broadly stable last week, while foreign exchange reserves held by the State Bank of Pakistan edged up by $6.2 million to $16.4 billion.

Week ahead (US & Asia)

RBI rate decision (Wednesday)

The RBI is expected to keep the repo rate unchanged at 5.25% this week as policymakers balance a rebound in inflation with rising external risks from the Middle East conflict. The central bank left rates unchanged in February in a unanimous decision and maintained a neutral stance, signalling that current policy remains appropriate.

Recent data supports that view. Q4 GDP rose 7.8%, above the 7.2% forecast, while CPI inflation edged up to 3.2% in February, slightly above expectations and the fastest pace in 11 months. That leaves the RBI with little urgency to shift policy for now, which could offer Indian stocks such as the Sensex some support.

FOMC minutes (Wednesday)

The minutes relate to the mid-March FOMC meeting, where the Fed left interest rates unchanged against a backdrop of rising uncertainty following the outbreak of conflict in the Middle East and its potential long-term implications for the US economy.

At the time, headline inflation was at 2.4%, but core inflation remained significantly higher, leaving policymakers in a difficult position as the labour market was also showing signs of slowing. The March meeting reinforced the idea that the Fed was in no rush to adjust policy until incoming data provided a clearer direction.

Since then, the backdrop has become even more complicated. With oil prices higher, inflation risks have intensified, while labour market data has shown signs of stabilising.

That likely keeps the Fed leaning more heavily towards the inflation side of its mandate, particularly if growth remains resilient. Hawkish minutes could boost the USD and pull Gold and stocks lower.

US PCE inflation (Thursday) and CPI (Friday)

US inflation data is a key focus this week. Core PCE inflation, the Federal Reserve’s preferred measure of inflation, will be released on Thursday- but this is for February and could be considered outdated given that it was before the more recent geopolitical developments in the Middle East, which have since driven up energy prices and increased the cost of key industrial inputs. Expectations are for core PCE to ease to 3.0% year-on-year, down from 3.1% in January.

Friday’s CPI for March is more timely and is expected to show inflation rising. US inflation had been easing in recent months, with headline CPI slowing to 2.4% YoY in February, from 2.7% in January, although part of that moderation likely reflected post-holiday discounting and inventory clearance. That dynamic may now be reversing.

With gasoline prices up around 30% and approaching $4 per gallon, there is a growing expectation that US inflation could rise to 3.4% YoY in March — and potentially higher — relatively quickly. While the US is more insulated than Europe and Asia, given its domestic energy production, there is already evidence that higher costs are beginning to filter through the rest of the economy.

Notably, the ISM manufacturing survey showed input prices jumping to their highest level since June 2022, reinforcing concerns that inflation may be broadening again.

That makes Friday’s CPI report especially important, particularly for markets still trying to judge whether the next Fed move is more likely to be a hold, hike, or eventual cut. Hot inflation would boost the USD and pull stocks lower.

Chinese CPI (Friday)

China’s inflation data will be watched for signs of how higher energy prices are feeding into the broader economy. Headline CPI is expected to remain relatively firm at around 1.2% year-on-year, down slightly from 1.3%, supported by higher fuel costs and a modest improvement in domestic demand.

Meanwhile, producer price inflation (PPI) is expected to return to positive territory, at around 0.4%, marking the first positive reading in four years. Recent PMI price components have already risen to their highest levels since 2022, suggesting pipeline inflation pressures are building.

For the PBoC, a firmer inflation backdrop could reduce the urgency for further near-term easing. That could make Chinese equities, such as the Hang Seng, more sensitive to upside inflation surprises, especially if they challenge the current policy-support narrative.

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