From Doves to Hawks: Central Banks adopt a hawkish stance amid Global Turmoil

The Federal Reserve (“Fed”), The European Central Bank (“ECB”), Bank of England, Sweden’s Riksbank and the Swiss National Bank all delivered their latest monetary decisions over the past week ended March 20, 2026. Most Central Banks kept rates unchanged, despite an earlier dovish bias, as the escalating U.S.–Israel–Iran conflict has heightened inflation uncertainty and prompted a more cautious approach to the timing of policy easing.

The ECB said the ongoing conflict could have material impact on near-term inflation through higher energy prices following Iran’s attack on Qatar’s liquefied natural gas (“LNG”) plant, threatening supplies to Europe. State-owned QatarEnergy, the largest LNG producer globally, is expected to declare force majeure on long-term contracts for up to five years for LNG supplies destined to Italy, Belgium, South Korea and China due to two damaged trains, putting the Middle East’s vital energy infrastructure in the line of fire. The ECB revised medium-term inflation expectations for 2026 upwards from 2.0% to 2.6%, on the back of higher energy prices.

The Fed left rates unchanged in the 3.5%-3.7% range during its latest policy meeting, with Chair Jerome Powell stressing that it is too early to assess the economic impact of the war. The Fed has also raised its inflation forecasts, citing both tariff-related pressures and rising energy costs linked to the Iran conflict. Rate cuts in the U.S. are highly unlikely in the short term. The shift in Central Bank policies reflects growing concern that higher oil prices could feed into core inflation and alter central banks’ policy trajectories. 

Impact on assets

Fixed Income

• U.S. Treasury yields moved higher following the Federal Reserve’s latest policy meeting, as markets interpreted the central bank’s stance as more hawkish than previously anticipated.

• Treasury yields rose, reflecting fears that the Fed might be reluctant to cut rates due to the inflationary impact of higher energy and oil prices.

The U.S. Dollar (“USD”)

• The Dollar Index, a measure of value of the USD relative to a basket of six major foreign currencies, was up to a 10-month high since the Fed’s hawkish hold, signalling commitment to a higher-for-longer interest rates.

• Higher U.S. yields and rising oil prices amid geopolitical risks drove investors into safe-haven U.S. assets, increasing demand for USD.

Gold

• Gold declined from early March highs of USD 5,300 to USD 4,400 per ounce, as hawkish central bank rhetoric and rising yields weighed heavily on sentiment.

• Higher real rates changed the calculus for capital allocation, particularly for sophisticated investors, sitting on large, leveraged gains in the bullion.

Global Equities

• Global equity markets broadly weakened following the Fed’s hawkish stance, as rising U.S. Treasury yields and a “higher-for-longer” rate outlook pressured valuations and risk sentiment.

• Growth and technology stocks led declines, reflecting their sensitivity to higher discount rates.

• Japanese equities outperformed, supported by a weaker yen, which boosts export competitiveness, as well as improving domestic fundamentals and continued investor inflows.

• The contrast highlights an increasingly fragmented global equity landscape, where monetary policy divergence and currency movements are driving regional performance differences.

  
  

Intrasia Wealth's view

• At Intrasia Wealth, we see the recent shift in Central Bank stance as pivotal in shaping current market dynamics. Following policymakers’ decisions to hold rates amid inflation risks, markets have repriced rate-cut expectations and pushed U.S. Treasury yields higher, particularly at the front end, tightening financial conditions and putting pressure on equities.

• Safe havens such as gold are not static; their performance is highly sensitive to the interplay of central bank policy, real yields and investor positioning and not headline risk-dependent.

• Oil prices remain elevated as the risk of sustained supply interruptions persists, which in turn feeds into inflation and complicates central bank policy decisions of any potential rate cuts. Equity markets are likely to remain sensitive to these forces.

At Intrasia, our firm’s positioning is centered around risk management and diversification:

• Duration & Fixed Income: We are positioned for a potentially more prolonged period of elevated yields, with cautious exposure to long‑dated bonds and selective allocation to high‑quality fixed income to benefit from yield carry while managing duration risk.

• Equities: Equity exposures emphasize quality and defensiveness, with overweight positions in sectors that historically fare better in tight financial conditions (e.g., consumer staples, healthcare).

  
  

• Commodities & FX: Elevated energy prices and supply risk support a tactical tilt toward energy sector exposures and selective commodity allocations. While gold has recently underperformed due to rising real yields and dollar strength, we still consider it a strategic hedge against prolonged geopolitical risk and inflation surprises.

Source: Macromicro, Gold/US Dollar/10Y Yield