Take Five: The fog of war

March 6 (Reuters) - The U.S. and Israel’s widening conflict with Iran will remain front and centre for the world’s financial markets next week.

Not only is the war itself driving sharp moves in oil, gas and global shipping prices, but normally crucial indicators - including Wednesday and Friday’s U.S. inflation releases compiled before hostilities erupted - risk being overshadowed.

Away from the Middle East, China will remain busy with its "Two Meetings" sessions, while in Latin America, Colombia holds congressional elections and presidential primaries ahead of its decisive presidential vote at the end of May.

Here’s all you need to know about the coming week in markets by Amanda Cooper and Alun John in London, Lewis Krauskopf and Rodrigo Campos in New York, and Gregor Stuart Hunter in Singapore.

1/ THE FOG OF WAR

The Middle East conflict has delivered an unwelcome reminder of how quickly an energy-price shock can unfold. Since Israel and the U.S. launched their attack on Iran on February 28, oil has gained nearly 20%, while European natural gas is up almost 60%.

Some of the most popular trades of the last year - from emerging-market equities to silver and tech stocks - have unravelled, as investors raced to cover losses elsewhere. The dollar, which lost nearly 10% in value over 2025, has risen against almost every major currency, while gold has temporarily shed its safe-haven mantle and instead served as a tool for damage control.

Most investors expect the conflict to last only a few weeks before some kind of yet-to-be-defined resolution. But the scope for surprise in either direction is clearly huge.

2/ PRE-WAR PRICES

Traders will get a double dose of U.S. inflation data next week just as the Middle East turmoil raises fresh doubts about the Federal Reserve’s rate-cut plans and the resilience of the broader economy.

The figures won’t capture this week’s oil and gas price spikes of course, but should still make for interesting reading.

Wednesday’s February Consumer Price Index is expected to have risen 0.2% on the month, a Reuters poll shows, after a moderation in rent inflation and - wait for it - cheaper gasoline helped produce a tepid January reading.

The other marker comes Friday with January’s personal consumption expenditures (PCE) price index. Taken together, the reports will offer a snapshot of inflation trends ahead of the Fed’s meeting later in March, even if events have almost certainly overtaken them.

3/ NOT SUCH A GOOD PLACE

France will convene G7 finance ministers and central bank governors next week to discuss the Middle East crisis.

Markets will be watching closely as concerns grow that surging oil and gas prices could turn major central banks hawkish again.

A prime example is the European Central Bank, where investors now see a rate hike by year-end as more likely than not - a sharp reversal from last week, when another cut was still on the table. So much for ECB chief Christine Lagarde’s "good place".

Reflecting the rapid market repricing, Germany’s rate-sensitive two-year yield is on course for its biggest weekly rise in a year. For UK gilts, it is the largest since late 2024, with traders now betting the Bank of England won’t be able to cut rates this month.

Also on the radar: Friday brings a heavy slate of European sovereign rating reviews, including for Germany, Italy and Spain. Turkey’s central bank rate decision on Thursday will be a cut-or-hold cliffhanger given the troubles next door.

4/ CHINA KEEPS BUSY

China will deliver fresh clues next week on the health of its economy.

Monday brings February inflation data, followed on Tuesday by trade figures for the first two months of the year. Lending data may also appear, though its timing is typically fluid.

The numbers will provide context for decisions taken at the "Two Meetings" - the annual session of national legislature the National People’s Congress and top political advisory body the Chinese People’s Political Consultative Conference.

The eight-day event, which opened on Thursday and runs until March 12, has likely already produced its biggest headline with the announcement of a 4.5-5% growth target. But next week’s data will highlight the challenges in meeting it.

5/ PRE-ELECTION POSTURING

Colombia holds congressional elections this weekend in a vote seen as an early indicator for the presidential race at the end of May. It coincides with inter-party presidential primaries that should clarify which candidates have momentum.

Polling suggests the presidential race is shifting, with left-wing candidate Ivan Cepeda of the ruling Pacto Historico coalition gaining ground, while right-wing outsider Abelardo de la Espriella could benefit in a second-round runoff as rivals fall away.

For investors, the key question is how the result might shape the next president’s ability to govern.

A divided outcome in May would likely keep markets steady. Stronger opposition momentum could support the peso and lift Colombia’s bonds, while gains for the left could send them the other way if fiscal worries return.

(Graphics by Vineet Sachdev. Compiled by Marc Jones. Editing by Mark Potter)