On March 5, 2026, financial markets were heavily influenced by persistent Middle East war tensions, surging oil prices, and a resilient U.S. labor market ahead of Friday's critical nonfarm payrolls report [1]. The U.S. dollar emerged as the top performer among major currencies, buoyed by sticky inflation concerns and hawkish commentary from Federal Reserve officials, notably Richmond Fed president Tom Barkin, who stated that persistent inflation and improving jobs data could shift the risk outlook for the Fed [1].
Equities extended their slide, and gold sold off sharply despite the ongoing geopolitical backdrop, which would typically favor safe-haven assets [1]. Oil prices surged to fresh war-era highs, marking WTI crude as the dominant mover in the session, while bond yields continued their fourth consecutive day of rises [1]. The market's risk assets retreated, underscoring the impact of the U.S.-Israeli war on Iran, now in its sixth day with no sign of de-escalation [1].
Key economic data released included Australia's household spending for January 2026 at 4.6% year-over-year (y/y), below the 5.2% forecast and previous 5.0% y/y, and a balance of trade figure at 2.63B, also below the 4.2B forecast and previous 3.37B [1]. The Swiss unemployment rate for February 2026 was 3.2%, matching the previous figure but slightly above the 3.1% forecast [1]. Euro area construction PMI for February was 46.0, slightly above forecast, while UK construction PMI came in at 44.5, below expectations [1]. Euro area retail sales for January 2026 grew 2.0% y/y, beating forecasts, but monthly sales fell -0.1% [1].
In the U.S., Challenger job cuts for February 2026 were 48.31k, significantly below the 95.0k forecast and previous 108.44k, indicating labor market resilience [1]. Export prices for January 2026 rose 2.6% y/y, slightly below forecast, while import prices were flat month-over-month and declined -0.1% y/y [1]. Initial jobless claims for February 28, 2026, were 213.0k, below the 215.0k forecast and close to the previous 212.0k [1].
The ECB Monetary Policy Meeting Accounts revealed that the Governing Council decided to keep the three key interest rates unchanged, citing a resilient euro area economy and expectations for inflation to stabilize at the 2% target in the medium term [1]. Bank of France Governor and ECB policy maker Francois Villeroy de Galhau stated there is no reason for the ECB to raise interest rates for now [1].
CONCLUSION
Thursday's session saw the U.S. dollar strengthen, oil prices surge, and equities decline amid ongoing geopolitical tensions and resilient U.S. labor data. Central banks maintained a cautious stance, with the ECB holding rates steady and Fed officials highlighting inflation risks. The market reaction was risk-off, with heightened volatility and significant asset class divergence.