The Strait of Hormuz Reopens While March Macroeconomic Data Shows US Consumer Sentiment Plunging, Europe Inflation Surging Amid Iran War

Global equity markets soldiered through another week, notching record gains in some cases as the Iran war rose toward another watermark – the reopening of the Strait of Hormuz.

In the U.S., the S&P 500 crossed the 7,000 level for the first time in history on April 14, closing at 7,022.95, and added further to those gains April 16, crossing the 7,100 threshold on April 17. Meanwhile, the STOXX 600 ended the week near 621, up roughly 3.9% over the trailing month. In Asia, the pattern was similar in shape but hit a reversal April 17: the Nikkei 225 hit a record high on April 15 as hopes for a U.S.-Iran deal fueled a broader regional rally before retreating 1.3% on April 17. While financial markets indicate future optimism, March macroeconomic releases provide a dose of caution.

In the U.S., the Bureau of Labor Statistics reported on April 14 that the Producer Price Index, or PPI, for final demand rose 0.5% on a seasonally adjusted basis in March, lifting the 12-month rate to 4% – the largest annual advance since February 2023 – with gasoline surging 15.7%, diesel prices soaring 42% and jet fuel up 30.7%, driving the goods-side increase. The energy shock fed directly into industrial production: the Federal Reserve’s G.17 release on April 16 showed industrial production, or IP, falling 0.5% in March – though total IP still grew at an annualized rate of 2.4% in the first quarter and manufacturing output expanded at a 3% annualized rate over the quarter.

Against that backdrop of softening output and rising pipeline costs, consumers have grown sharply more pessimistic: the University of Michigan’s preliminary April survey, showed sentiment falling roughly 11% from March, extending a decline that began at the onset of the Iran conflict and leaving the index approximately 9% below a year ago, with declines broad across all demographic groups, income levels and political affiliations. Year-ahead inflation expectations increased to 4.8% in April from 3.8% in March – the largest one-month increase since April 2025.

The inflationary impulse was not confined to the United States. Eurostat reported on April 16 that the euro-area annual HICP inflation rate rose to 2.6% in March from 1.9% in February – EU-wide inflation similarly increasing to 2.8% from 2.1% – with services contributing the largest component to the annual rate at +1.49 percentage points, followed by energy at +0.48 pp and food, alcohol and tobacco at +0.45 pp, as annual inflation rose in 23 of 27 member states on the month and ranged from a low of 1% in Denmark to a high of 9% in Romania.

Separately, Eurostat data released April 13 showed the EU recorded a record trade surplus of €220.5 billion in medicinal and pharmaceutical products in 2025, exporting €366.2 billion against imports of €145.7 billion, as exports rose 16% year over year from €315.7 billion in 2024 while imports grew 21.0% from €120.4 billion – a structural bright spot in an otherwise challenging external trade environment.

Fundamentals by Octus released fourth-quarter 2025 analytics for its portfolio of high-yield and leveraged finance companies under coverage this week. U.S. leveraged finance companies under Octus coverage posted median revenue growth of 3.8% in the fourth quarter, a stabilization from the prior quarter but well below the S&P 500’s 9% growth rate over the same period. All 11 GICS sectors recorded positive revenue and EBITDA growth, indicating a steady recovery through the year, though challenges including the AI-related software selloff and U.S.-Iran tensions are expected to pressure margins and growth in early 2026.

Octus Fundamentals data also shows that in the EU, median revenue growth held at 2.6% year over year and EBITDA growth came in at 3.7% – outpacing EU inflation by 120 bps – but both figures ranked among the lowest in three years, underscoring a widening performance gap between U.S. and EU sub-investment-grade issuers. The materials sector continued to underperform in Europe, with revenue and EBITDA declines extending for a third consecutive quarter, while information technology and financials led to the upside. Credit metrics, including interest coverage and net leverage, improved in both regions, though these figures may be overstated pending reports from higher-leverage private firms.