Crisis warning! The global market "stress index" is approaching the level of the "tariff shock" from last April.

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The Middle East situation is reshaping the global asset landscape, with market pressures surging to the levels seen during last year's “tariff shock.”

On March 12, Bank of America's cross-market risk indicator, which measures implied volatility in global options markets, rose to 0.79, approaching the 0.89 peak during last April's so-called “reciprocal tariffs.” Mandy Xu, Head of Derivatives Market Intelligence at Cboe Global Markets, stated:

This is the first time since last year's sharp drop related to reciprocal tariffs that implied volatility across all major asset classes has broadly risen above their long-term averages—this is often a signal of macro crises.

According to CCTV News, on the afternoon of March 13 local time, U.S. President Trump said there are differences between the United States and Israel regarding “the goal of ending the current war.” Trump said that military operations are “far ahead of plan” and will “continue as long as necessary.”

The intensity of the U.S.-Iran conflict continues to escalate, with neither side showing signs of a ceasefire. This has led to surging oil prices, climbing financing costs, and continuous falls in U.S. equity indexes. The triple pressures are hitting almost every corner of financial markets simultaneously.

(Since March, comparison of the trends of U.S. stocks, bonds, and oil)

Volatility spikes across the board, with multiple indicators hitting yearly or even record highs

The current market pressure is not limited to equities, but has become a comprehensive cross-asset resonance.

Bank of America's cross-market risk indicator aggregates the implied volatility of global equities, interest rates, currencies, and commodities option markets into a single reading, reflecting traders’ real-time expectations of global market turbulence. The reading on March 12 reached 0.79, indicating that market pressure has significantly exceeded the normal range.

This week, the MOVE index, which tracks expected bond volatility, surged to its highest level since June last year. The Cboe Oil Volatility Index earlier this week briefly hit a record high from 2020, while the Cboe index tracking junk bond volatility has nearly tripled from its January level this year.

Rocky Fishman, founder of research firm Asym 500, noted:

Looking at S&P 500 volatility alone underestimates the current volatility level in global markets. Commodities, especially oil, have exhibited exceptionally high volatility, and the high premium of oil's implied volatility over realized volatility reflects concerns about a further deterioration of the situation.

(In the past nine trading days, U.S. equity ETFs accounted for more than 35% of total trading volume, but U.S. stock volatility remained significantly low)

Diminishing policy buffers expose fragile exposures

Over the past year, extremely loose financial conditions have provided some support to stock prices. However, this cushion is rapidly fading.

Unlike last year’s tariff shock, the root of this round of market turmoil lies in Middle Eastern energy supply. Saudi Arabia, Iraq, the UAE, and Kuwait have collectively cut production, the Strait of Hormuz is nearly paralyzed, and oil prices are soaring sharply as a result.

Analysis suggests that while the previous episode stemmed from policy shocks, this time it is a geopolitical supply crisis, which penetrates the commodities market more directly and lastingly.

Furthermore, the Middle East situation has revealed multiple vulnerabilities that accumulated during calm periods, especially in high-leverage asset sectors. Investors are already uneasy about AI’s erosion of profitability in some companies.

Wallstreetcn noted that the Tech Seven Giants Index closed more than 10% below its October high on Friday, officially entering a technical correction. All seven companies are in negative territory for the year, with Microsoft down more than 18%.

(Weekly chart: Tech Seven Giants Index versus the other 493 S&P 500 components)

This collective decline signals the end of the phase of the super bull cycle for big tech stocks over the past two years. Meanwhile, increasing cracks appearing in the private credit market are further intensifying overall market anxiety.

This week saw a sharp divergence between investment-grade credit spreads and equity risk, with fractures in the credit market gradually spreading to the broader financial sector. Alternative credit and Business Development Companies (BDCs) are under pressure, beginning to drag down the overall performance of the financial sector.

(This week, investment-grade credit spreads diverged from equity market risk)

Analysis believes that multiple risk exposures are surfacing simultaneously under external shocks. After a honeymoon period of low volatility, the market is shifting to a stressed state at a faster pace.

Risk warning and disclaimerThe market involves risks, and investment should be cautious. This article does not constitute individual investment advice, nor does it take into account the special investment objectives, financial situation, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their specific situation. Investments made accordingly are at your own risk. ```