28 February 2026 | Market Analysis & Outlook
- Executive Summary
Global financial markets on 28 February 2026 were shaped by the convergence of three major forces: escalating US–Iran geopolitical tensions driving a sharp rally in crude oil; persistent investor anxiety surrounding artificial intelligence’s disruptive impact on labour markets; and a pronounced sectoral rotation away from high-growth technology equities into traditional cyclical sectors. These dynamics produced a bifurcated outcome — energy and resource-heavy indices such as London’s FTSE 100 reached fresh record highs, while Wall Street’s tech-laden benchmarks retreated. For Singapore, as a small open economy deeply integrated into global trade and capital flows, the confluence of these forces carries material implications for monetary policy, equity markets, the real economy, and energy security. - Global Market Snapshot — 28 February 2026
Index / Asset Change Close / Level Commentary
Dow Jones (NY) −1.0% 49,012.86 Dragged by tech; cyclicals partially offset
S&P 500 (NY) −0.5% 6,872.12 Down ~0.4% for February overall
Nasdaq Composite −0.8% 22,695.29 Tech sector weakness; AI disruption fears
FTSE 100 (London) +0.7% 10,922.85 (record) Energy/resources stocks lifted by oil rally
CAC 40 (Paris) −0.5% 8,580.75 Risk-off sentiment in Europe
DAX (Frankfurt) Flat 25,284.26 Balanced; industrial vs. risk-off
Nikkei 225 (Tokyo) +0.2% 58,850.27 Marginal gain; yen steady at 156.04
Hang Seng (HK) +1.0% 26,630.54 Asia outperformed; China demand optimism
Shanghai Composite +0.4% 4,162.88 Modest gains amid commodity strength
Brent Crude +2.3% $72.44/bbl 7-month high; briefly above $73
WTI Crude +2.2% $66.65/bbl Iran risk premium fully priced in
EUR/USD +0.19% $1.1821 Dollar softness persists on macro uncertainty - Key Drivers — Detailed Analysis
3.1 Geopolitical Risk: US–Iran Tensions and the Oil Price Spike
The dominant market-moving event of the session was the sharp deterioration in US–Iran relations following the apparent breakdown of diplomatic talks on 27 February 2026. A US advisory calling on its citizens to leave both Israel and Iran signalled a dramatic escalation in the probability of a direct military confrontation. Brent crude briefly pierced the $73 per barrel threshold — a seven-month high — before settling at $72.44, up 2.3% on the session. WTI followed closely, closing at $66.65, up 2.2%.
The mechanism through which geopolitical risk transmits to energy prices is well-established: the Strait of Hormuz, through which approximately 20% of global oil trade transits, is directly exposed to an Iran conflict scenario. Any disruption to this chokepoint would tighten global oil supply instantaneously. The market was, on 28 February, pricing in a non-trivial probability of such disruption — a classic geopolitical risk premium.
Critically, Thursday’s US–Iran talks were interpreted not as a de-escalatory signal, but as a ‘last-ditch’ diplomatic effort that had failed, intensifying rather than relieving pressure. This dynamic — where failed diplomacy accelerates rather than decelerates market stress — is an important pattern for risk managers to understand.
3.2 Artificial Intelligence: Disruption Anxiety vs. Investment Euphoria
A second major driver was the continued recalibration of market expectations around artificial intelligence. Two distinct AI-related narratives were in tension on 28 February:
3.2.1 AI Labour Disruption — Block’s Announcement
Financial services firm Block announced plans to slash its workforce by nearly half, explicitly attributing the decision to AI-driven efficiency gains. While individual firm restructurings are not uncommon, the symbolic significance of a major listed firm publicly announcing AI as the driver of a 50% workforce reduction sent a chill through equity markets. Investors began to question whether AI adoption, previously understood as a productivity tailwind, might simultaneously destroy the consumer spending base and corporate revenue streams that underpin equity valuations.
3.2.2 Nvidia’s ‘Priced-to-Perfection’ Problem
Nvidia — the central bellwether of the AI infrastructure investment cycle — reported quarterly profits more than doubling to $43 billion. In any prior era, such results would have propelled a stock sharply higher. Instead, Nvidia fell 5.5% on Thursday and a further 2% on Friday following OpenAI’s announcement of a $110 billion funding round that includes the company. The market’s adverse reaction exemplifies the ‘priced-to-perfection’ dynamic: when investor expectations are so elevated that even exceptional earnings disappoint, the risk/reward calculus for holding the stock becomes unfavourable.
Additionally, concerns about stretched valuations and Nvidia’s structural dependence on sustained capital expenditure by hyperscalers — a flow that could be disrupted by macro tightening or a re-prioritisation of AI budgets — contributed to the negative sentiment.
3.3 Sectoral Rotation: From Growth to Cyclicals
The divergence between the S&P 500 (down ~0.4% for February) and the Dow Jones Industrial Average (up ~1.2% for the month) is analytically significant. This spread reflects a rotation out of high-multiple, AI-linked growth stocks into more traditional cyclical sectors — industrials, financials, energy, and materials. Such rotations typically occur when investors perceive the risk-adjusted return on growth equities as deteriorating relative to value and cyclical alternatives.
This is not necessarily a bearish signal for the broader economy. Cyclical outperformance can indicate expectations of continued economic expansion outside the technology sector. However, it does suggest that the AI-fuelled bull market in large-cap technology stocks may be entering a period of consolidation or correction, which has significant implications for passive investors with heavy index concentration in mega-cap tech.
3.4 Netflix: A Contrarian Bright Spot
Netflix surged nearly 10% after withdrawing from the bidding war for Warner Bros., following Paramount Skydance’s competing bid. Markets rewarded Netflix’s capital discipline — an increasingly rare signal in an environment where tech firms have been criticised for profligate capital deployment in AI. The episode illustrates that stock-specific catalysts continue to drive meaningful divergence even within a risk-off session. - Forward Outlook
4.1 Geopolitical Trajectory
The near-term trajectory of oil prices will be heavily contingent on whether US–Iran tensions escalate into kinetic conflict or de-escalate through back-channel diplomacy. Three scenarios are plausible:
Scenario Probability (Indicative) Brent Crude Trajectory Equity Market Impact
Military strike on Iran ~20–25% $85–$100+ per barrel Sharp risk-off; S&P −5% to −10%
Prolonged diplomatic stalemate ~50–55% $70–$80 per barrel Moderate risk premium; modest equity drag
Diplomatic resolution ~20–25% $60–$65 per barrel Risk-on rally; tech rebound likely
Note: Probability estimates are illustrative analytical constructs, not financial forecasts. Actual outcomes will depend on intelligence assessments and political developments not captured in market data.
4.2 AI Investment Cycle
The AI investment cycle is unlikely to reverse in the medium term — the structural demand for computing infrastructure, data centres, and semiconductor capacity remains intact. However, markets are increasingly differentiating between AI enablers (semiconductor firms, cloud hyperscalers) and AI adopters (firms deploying AI to cut costs and headcount). The former may face near-term valuation compression; the latter may see margin expansion but face revenue risk if AI-driven unemployment suppresses consumer demand.
A key watchpoint is capital expenditure guidance from the major cloud hyperscalers (Microsoft, Google, Amazon, Meta) in upcoming earnings cycles. Any reduction in AI infrastructure spending would be highly negative for Nvidia and the broader semiconductor complex.
4.3 Sectoral and Macro Outlook
The rotation into cyclicals is consistent with a late-cycle macroeconomic environment in the United States. If US economic growth remains resilient — supported by a still-tight labour market and continued fiscal stimulus — cyclical sectors may continue to outperform. The key downside risk is that AI-driven labour displacement accelerates faster than new job creation, eroding consumer spending and tipping the economy toward a sharper slowdown than currently priced.
The US dollar’s continued softness (EUR/USD at $1.1821) reflects both macro uncertainty and growing concerns about US fiscal sustainability. A weaker dollar is generally supportive of commodity prices and emerging market assets — a dynamic relevant for Singapore’s regional context.
- Impact on Singapore
5.1 Overview of Singapore’s Exposure
Singapore’s economy is uniquely positioned at the intersection of the forces described above. As one of the world’s most open economies, with trade in goods and services equivalent to approximately 300% of GDP, Singapore is highly sensitive to shifts in global commodity prices, capital flows, and regional trade dynamics. The following subsections analyse the specific channels of transmission.
5.2 Energy and Inflation
Singapore imports virtually all of its energy needs. An oil price spike to $73–$100+ per barrel would transmit directly into higher electricity tariffs, transport costs, and manufacturing input costs. While Singapore’s headline inflation has moderated in recent quarters, an oil-driven cost-push shock could reignite inflationary pressures and complicate the Monetary Authority of Singapore’s (MAS) policy stance.
The MAS manages monetary policy through the exchange rate (the S$NEER policy band) rather than interest rates. A sustained oil-driven inflation shock would likely bias the MAS toward maintaining or slightly tightening the appreciation slope of the S$NEER, thereby absorbing some imported inflation. However, this approach has limits if oil prices remain elevated for extended periods.
5.3 Straits of Hormuz and Energy Supply Security
Singapore’s status as a major global refining and bunkering hub — processing approximately 1.5 million barrels of crude per day — makes it acutely sensitive to disruptions in Middle Eastern oil supply routes. Jurong Island’s refinery complex sources a significant proportion of its crude from Gulf producers. A conflict scenario that disrupts Hormuz transit would require Singapore refiners to seek alternative, likely more expensive, crude supply from West Africa, the Americas, or Australia, compressing refining margins and potentially leading to temporary supply disruptions.
Singapore’s strategic petroleum reserves, maintained under the International Energy Agency (IEA) framework, provide a buffer — but these are designed for short-term disruptions and would not be sufficient to offset a prolonged Hormuz closure.
5.4 Equities: Singapore Exchange (SGX) Implications
SGX Sector Exposure Impact Assessment
Oil & Gas (Keppel, SembCorp) High positive Earnings upgrade cycle likely if Brent sustains above $70
Airlines (Singapore Airlines) High negative Fuel cost escalation; demand risk if regional conflict widens
REITs (broadly) Mixed Higher rates (inflation) negative; but stable income attractive in risk-off
Banks (DBS, OCBC, UOB) Moderate positive Higher rates supportive of NIM; but credit risk if macro deteriorates
Tech-adjacent (Venture Corp, UMS) Negative Correlated with global tech downturn; supply chain risk
Commodities (Wilmar, Olam) Positive Commodity price inflation supportive of revenues
5.5 Real Economy: Trade, Tourism, and Shipping
Singapore’s port, Tanjong Pagar and Pasir Panjang, is the world’s second-largest container port by throughput. Heightened geopolitical risk in the Middle East disrupts shipping routes through the Red Sea and Suez Canal — already under pressure from Houthi attacks — potentially rerouting vessels around the Cape of Good Hope and increasing shipping times and costs. This is both a risk (higher logistics costs for Singapore-routed trade) and an opportunity (increased demand for Singapore as a transshipment hub if regional alternatives become less viable).
Tourism from the Middle East, while not Singapore’s largest inbound segment, would likely decline in an active conflict scenario, with spillover effects on the hospitality and MICE sectors. Conversely, Singapore could benefit as a safe-haven destination for regional capital flight if Gulf state investors liquidate riskier assets.
5.6 AI and Singapore’s Technology Sector
Singapore has invested heavily in positioning itself as Southeast Asia’s AI hub, with major hyperscalers (Google, Microsoft, AWS) having established significant data centre presences on the island. The AI investment cycle’s continuation is therefore directly positive for Singapore’s economic growth outlook, employment in the technology sector, and real estate demand (data centres).
However, the AI labour disruption narrative — as exemplified by Block’s announcement — is particularly salient for Singapore, which has historically relied on a highly skilled, high-cost workforce. If AI-driven automation accelerates across financial services, legal, and professional services sectors (which are disproportionately large in Singapore’s GDP), the structural employment consequences could be significant. The Ministry of Manpower and SkillsFuture Singapore’s workforce transition programmes will face increased demand.
5.7 Capital Flows and the Singapore Dollar
Singapore is a major regional financial centre and safe-haven destination for Asian capital. Risk-off episodes globally tend to attract capital flows into Singapore dollar-denominated assets, providing support for the SGD. The current environment — elevated geopolitical risk, tech sector volatility, and macro uncertainty — is broadly supportive of Singapore’s safe-haven status.
At the same time, if the AI disruption narrative gains traction and large-cap tech valuations correct materially, global risk appetite will decline. This could temporarily reduce foreign direct investment flows into Singapore’s technology sector, though the structural case for Singapore as a digital infrastructure hub remains intact.
- Conclusions and Policy Implications
The market events of 28 February 2026 encapsulate a broader transition in the global investment landscape: from an environment dominated by AI-driven optimism and low geopolitical risk premiums, toward one characterised by heightened uncertainty across multiple dimensions simultaneously. For Singapore, this transition requires vigilance across several policy fronts.
First, energy security planning must account for a sustained period of elevated oil price volatility. Investment in domestic renewable energy capacity and diversification of crude supply sources should be accelerated. Second, the MAS must remain responsive to both inflationary and growth risks — the current environment is one where both can escalate rapidly. Third, Singapore’s economic development agencies (EDB, ESG) should continue to attract AI investment while simultaneously developing robust workforce transition frameworks to manage AI-driven labour displacement.
Fourth, Singapore’s financial sector regulators should monitor exposure to US technology equities through SGX-listed entities and institutional portfolios, given the elevated valuation risk in the sector. Finally, from a geopolitical risk management perspective, Singapore’s foreign policy — premised on being a friend to all and enemy of none — positions it well to navigate US–Iran tensions without being forced to take sides, preserving trade and diplomatic relationships with both Western partners and Gulf states.
In sum, 28 February 2026 was not a day of financial crisis — but it was a day of crystallising risks that have been building for some months. Singapore’s policymakers, investors, and corporate leaders would be well-advised to treat it as a warning signal rather than a transient market fluctuation.
Disclaimer
This case study is prepared for academic and informational purposes only. Market data sourced from AFP/Yahoo Finance (28 February 2026). Probability estimates and forward-looking statements are analytical constructs and do not constitute investment advice. Readers should conduct their own due diligence before making any financial decisions.