Citadel Securities Forecasts Shift Towards Demand Destruction in Markets

Market Fallout from Middle East Conflict Shifts Focus to Global Growth

Citadel Securities reports that the market impact of the Middle East conflict is transitioning from an initial inflation shock to a hit on global economic growth. Analysts believe that the shift toward weaker activity and "demand destruction" could support longer-term inflation-adjusted bonds.

Key Developments:

• US Dollar call options offer attractive protection against further escalation in Iran, according to strategist Frank Flight.
• President Donald Trump's decision to delay strikes on Iranian energy infrastructure has spurred a rally in stocks and bonds, while oil and the dollar have declined.
• Bond Yields have surged across major markets since the war began in late February, with investors pricing in the risk of higher interest rates to counter hotter inflation.

Read also: Market Analysis: Key Stocks to Watch - Narayana Hrudayalaya, ABB India, Federal Bank, Premier Energies, Ather Energy and More

Market Outlook:

• Real interest rates are expected to "flatten" in the forward market as investors focus on the growth damage from the conflict.
• The conflict is approaching a crossroads, with either escalation or a ceasefire possible, both carrying negative implications for growth.
• A prolonged supply shock would hit an already fragile global economy, particularly developing countries, which are energy importers.

Risks:

• Currency depreciation could force central banks to raise rates, amplifying domestic slowdowns and feeding back into global growth while reinforcing dollar strength.
• Shortages are spreading beyond oil to liquefied natural gas, helium, and fertilizer, raising the risk of broader supply constraints.

Read also: FirstClub Secures $55 Million in Funding from Peak XV, Sofina, and Other Investors 9 Months After $22 Million Series A Round

Key Figures:

• March Yield Jump: Bond yields have surged across major markets since the war began in late February.
• Inflation-Adjusted Bonds: Longer-term inflation-adjusted bonds may see support due to the shift toward weaker activity and "demand destruction".