Oil Rally and Inflation Fears Shake Global Stocks
Synopsis
China’s Shanghai Composite rose 0.66% on Thursday after two straight days of losses. Beijing set its 2026 growth target at 4.5% to 5%, slightly lower than last year. The move gave investors some clarity and helped stocks in China and Hong Kong recover. But globally, things were still shaky. The war between the US and Iran kept oil prices high and rattled markets everywhere. European and Asian indexes stayed under pressure, and the US dollar got stronger as investors looked for safer places to put their money.
China’s markets rebounded on Thursday after Beijing announced that its target for 2026 growth was 4.5% to 5%, providing investors with some guidance following two tough days. But around the world, the tableau stayed tense. The US-Iran conflict helped keep oil prices elevated and drove investors to seek safer assets such as the US dollar.
Key Highlights
- In the Asia-Pacific region, China’s Shanghai Composite gained 0.66% on Thursday following two previous days of losses
- Beijing’s economic growth target for 2026 is a record-low range of 4.5% to 5%
- Oil prices remained high as the US-Iran conflict entered its second week
- The dollar gained as investors sought safer assets.
China’s Markets Bounce Back, but the Rest of the World Is Still Antsy
China’s share market fared better on Thursday after a rough couple of sessions. The Shanghai Composite added 27 points, or 0.66%, to close at 4,109. It was a welcome bounce after the index slipped almost 1% on the previous day. Stocks in Shenzhen also advanced, adding 1.23% to finish at 14,089. Tech and power companies were at the helm of the recovery, with several stocks in those sectors surging between 3% and 10% in one session.
The rest of the world wasn’t as settled. The battle between the US and Iran that began about a week ago continues. That is keeping investors on their toes and preventing most markets from calming.
Beijing Sets More Modest Growth Target for 2026
On Thursday, China’s government set its official growth target for 2026, a range of 4.5% to 5%. That is a little lower than the 5% it was targeting last year. It is also China’s lowest target since it started releasing these figures in the early 1990s. The announcement was made during the National People’s Congress, the country’s largest annual political gathering.
Most analysts were not caught off guard by the lower target. China is also contending with softer domestic spending, elevated U.S. trade tariffs and increasing pressure to move away from older industries. A little bit lower bar would give the government more room to push through reforms without spooking markets if growth comes in below 5%.
Why the Oil Price Has Been High Due to the Middle East War
The war between the US, Israel and Iran began nearly a week ago, with no indication it will end any time soon. Oil prices spiked sharply when the fighting started and have remained high since. At one point last week, oil prices surged more than 13% in a single day, one of the largest single-day increases in years. Prices have fallen a bit since then but are far higher than they were before strikes on Iran commenced.
For most of the world, high oil prices are a problem. When fuel is expensive, it becomes more costly to make things, transport goods and do business. Airlines, shipping companies and factories all get it fast.
The US Dollar Strengthened, and That Was Bad for Other Markets
The dollar gained almost 1% versus other major currencies and at one point reached its highest level in five weeks. A stronger dollar makes things more difficult for countries that borrow in US dollars, and it also drives down the price of items such as gold and other metals that are priced in dollars.
Gold briefly crossed above $5,400 per troy ounce earlier this week before retreating. It finished Thursday with some gains, but far below its highs. The Japanese, South Korean and Indian stock markets all fell by between 1% and 1.35% for the week. The main indexes in Europe, Germany’s DAX and France’s CAC 40, also remained on the defensive. The DAX is more than 6% lower than the all-time high it reached in January.
Wall Street Is Looking and Waiting
US stocks have been swinging up and down all week with no clear direction. The S&P 500 fell 0.43 per cent in its last session, and futures pointed lower again going into Friday. Tech stocks received a slight boost midweek, chips and semiconductor stocks sharply recovered on Wednesday after a big sell-off, but that relief was short-lived.
There are two things analysts are scrutinising very closely right now. First, how long the Middle East conflict continues and whether oil prices move toward or above $100 a barrel. Second, what the latest U.S. jobs numbers say about the American economy’s health. If the job numbers come in weak this Friday, that will only add another layer of worry to a situation already full of war fears weighing on markets. Either way, most buyers and sellers are not counting on a peaceful close to the week.
FAQs
1. Why did China’s share market rise on Thursday?
Beijing setting its 2026 growth target buoyed investors. It provided them with some clarity after two days of haziness and losses.
2. Why are oil prices still so high?
About a week ago fighting began between the US, Israel, and Iran, it proscribed stops. That maintains fears of oil supply disruption and prices high.
3. What made the US dollar stronger this week?
In times of global uncertainty, many investors shift money into dollars as a defensive play. Go demand for dollars, the currency shot up.
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