Our Monthly Business Commentary

March, 2026

The U.S.-Israeli military strikes on Iran that began February 28 sent shockwaves through global markets. The S&P 500 fell to its lowest level of 2026, closing at 6,632 on March 13 and posting its first three-week losing streak in roughly a year. Iran’s effective closure of the Strait of Hormuz, through which roughly 20% of global oil supplies transit, pushed West Texas Intermediate crude past $98 per barrel and Brent crude above $100 for the first time since 2022. The CBOE Volatility Index (VIX) surged to 28.4 as institutional investors shifted into broad defensive positioning.

The conflict triggered a sharp sector rotation. Energy stocks climbed more than 2.5% in the week ended March 13 and were up over 10% on the year. Utilities also gained on defensive demand and rising electricity consumption tied to artificial intelligence data centers. Technology and communication services each fell more than 1% on March 13, extending a pattern from February when big-tech weakness dragged the Nasdaq down 3.4% for that month. Retail investors poured record amounts into oil-linked exchange-traded funds as capital moved away from growth sectors toward defensive names.

A troubling stretch of economic data compounded the geopolitical anxiety. The economy shed 92,000 jobs in February, far worse than the 50,000 gain economists expected¹. The unemployment rate rose to 4.4% and average hourly earnings climbed 0.4% for the month, reinforcing concerns about sticky wages¹. The Consumer Price Index (CPI) for February showed annual headline inflation at 2.4% and core CPI, which excludes food and energy, at 2.5%, figures that largely predated the oil shock². In addition, fourth-quarter 2025 GDP growth was revised down to 0.7% annualized from the original 1.4% estimate, well below the 1.5% consensus³. Slowing growth, paired with surging energy costs, has revived stagflation fears not seen since 2022.

The bottom line: The Federal Reserve’s March 17–18 meeting now looms as a critical inflection point, with policymakers weighing inflation risks from the oil shock against a weakening labor market. Futures markets have pulled forward expectations for the next rate cut to July⁴. The International Energy Agency’s agreement to release 400 million barrels from member-country reserves may help stabilize prices in the near term, but the Strait of Hormuz remains effectively closed. With consumer sentiment fragile and earnings season approaching, the path forward depends on whether the conflict de-escalates before lasting economic damage takes hold.

Sources:

1. Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm
2. Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
3. Bureau of Economic Analysis, https://www.bea.gov/news/2026/gdp-second-estimate-4th-quarter-and-year-2025
4. CME Fed Watch Tool, https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

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