The European Central Bank can no longer look through the inflationary impact of the war in Iran as price pressures spread beyond energy and the risk of unanchored inflation expectations rises, according to Executive Board member Isabel Schnabel . Damage to energy infrastructure and global supply chains has already altered price dynamics in a more lasting way, meaning policymakers may need to respo...
The European Central Bank can no longer look through the inflationary impact of the war in Iran as price pressures spread beyond energy and the risk of unanchored inflation expectations rises, according to Executive Board member Isabel Schnabel . Damage to energy infrastructure and global supply chains has already altered price dynamics in a more lasting way, meaning policymakers may need to respond even if the conflict were to end immediately, Schnabel said at a Bank of Korea conference Monday in Seoul. “We can no longer look through this shock,” said Schnabel, who is widely regarded as the ECB’s most hawkish policymaker. “The risk of de-anchoring inflation expectations is rising.” The comments reinforce Schnabel’s remarks from last week when she said a rate hike at the ECB’s June 10-11 meeting would be needed . Markets broadly expect such a move as officials grapple with the prospect that higher energy costs spill over into broader inflation, though policymakers have been cautious to signal how far rates will rise given uncertainty over the economic fallout from the conflict. While most officials remain cautious on the path beyond June as the economy is also already slowing, Lithuania’s Gediminas Simkus said last week that a second rate increase “is more likely than not,” though the timing is unclear. Schnabel suggested it was too early to specify how many rate increases might be needed, saying policymakers would continue to assess incoming data and developments in the Middle East. “It’s too early to say that it’s a certain number of hikes and then it’s done,” she said. “We really have to see what’s going to happen.” She said the current shock differs from previous energy crises because it is increasingly acting as a global demand shock while also pushing up production costs around the world. Rising producer-price pressures in China and elsewhere are likely to feed through global supply chains, lifting goods inflation after a prolonged period of subdued price grow...
phuttaphat tipsana/iStock via Getty Images Key Takeaways Markets: Most major equity indexes declined in the first quarter as concerns over rising AI capex at hyperscalers, inklings of AI disruption in software, stress in private credit and a shock to energy prices from the war in the Middle East outweighed a nascent rally for cyclical stocks. The S&P 500 Index returned -4.3%. Contributors: Stock s...
phuttaphat tipsana/iStock via Getty Images Key Takeaways Markets: Most major equity indexes declined in the first quarter as concerns over rising AI capex at hyperscalers, inklings of AI disruption in software, stress in private credit and a shock to energy prices from the war in the Middle East outweighed a nascent rally for cyclical stocks. The S&P 500 Index returned -4.3%. Contributors: Stock selection in financials proved beneficial; overweights to materials and industrials and underweights to IT and consumer discretionary also helped. Detractors: Stock selection in the consumer staples, IT and materials sectors detracted from relative results. Outlook: Current conditions argue for a more cautious stance. The continued strength in high-beta AI and quantum computer stocks during the March market decline indicates that animal spirits remain high. In our view, the “buy the dip” mindset that was so successful over the past decade looks less reliable in an environment where inflation risk, policy uncertainty and labor market softening are all rising simultaneously. Performance Review The ClearBridge Appreciation Portfolios performed better than the benchmark S&P 500 Index in the first quarter of 2026. On an absolute basis, the Portfolios had positive contributions from five of 11 sectors. The energy sector was the main positive contributor, while IT, communication services and financials were the main detractors. On an individual stock basis, the biggest relative contributors during the quarter were ASML, Entergy ( ETR ), Eaton ( ETN ), Johnson & Johnson and Exxon Mobil ( XOM ). The biggest detractors were Microsoft, McCormick ( MKC ), Bank of America ( BAC ), Thermo Fisher Scientific and not owning Applied Materials ( AMAT ). ASML ( ASML ), in the IT sector, is a leading maker of extreme ultraviolet lithography equipment critical for the production of advanced semiconductors. Share performance was primarily fueled by record-breaking orders for AI infrastructure and ...