Monthly Market Update – March 2026

Iran war, energy shock and sentiment

The most consequential development for markets in March was the ongoing war centered on Iran and the closure or disruption of shipping through the Strait of Hormuz, a key chokepoint for global oil and liquefied natural gas (LNG) flows. The conflict curtailed roughly 20% of global oil supply moving through the strait, prompting what the International Energy Agency has described as one of the most severe energy supply disruptions on record.

Energy prices responded quickly. Brent crude oil, the global benchmark, climbed from about $72 to $73 dollars per barrel in late February to more than $110 by late March, a rise of roughly 50% to 55% over the period. In the United States, gasoline prices moved higher as well, with nationwide averages pushing noticeably above early‑year levels and, in many areas, back above $3 per gallon.

This energy shock weighed on risk appetite. Equity markets around the world experienced bouts of selling pressure, while traditional safe‑haven assets such as U.S. Treasuries and the dollar saw periods of strong demand. Investor sentiment oscillated between hope for a negotiated off‑ramp and concern that a prolonged conflict could echo prior energy‑driven slowdowns, contributing to elevated day‑to‑day volatility through the month.

Inflation pressures re‑accelerating

Even before the latest spike in oil prices, U.S. inflation had settled into a range slightly above the Federal Reserve’s 2% target. The Consumer Price Index (CPI) for the 12 months ending in February 2026 increased 2.4%, unchanged from January and the lowest annual rate since mid‑2025. Core CPI, which excludes food and energy, rose 2.5% over the same period, also steady compared with the prior month.

Beneath those headline figures, key components such as food and shelter remained firm: food prices were up about 3.1% year over year and shelter up roughly 3.0% as of February. Meanwhile, some goods categories, including used cars and trucks, continued to exert modest disinflationary pressure as prices fell compared with a year earlier.

The war‑driven jump in energy prices altered inflation expectations for March and beyond. Market‑based measures and survey‑based forecasts began to converge around CPI readings in the low 3% range for the 12 months through March, versus the 2.4% rate observed through February. Analysts increasingly expected that the combination of higher oil and gas prices and still‑firm services inflation could keep headline inflation above 3% in the near term, even if core inflation trends eased only gradually.

This backdrop complicated the policy outlook. While the February data alone would have supported a narrative of gently cooling inflation, the March energy shock reintroduced concern that inflation could re‑accelerate or remain sticky at levels above the Federal Reserve’s target for longer than previously expected. As a result, investors trimmed expectations for near‑term interest‑rate cuts and, in some scenarios, began to consider the possibility that rates might need to remain restrictive for an extended period.

Choppy U.S. stocks with a late‑month surge

U.S. equity markets spent most of March under pressure, with most major indices recording notable swings as investors digested war headlines and higher oil prices. By late in the month, however, signs of tentative progress on the diplomatic front and some easing in the most extreme energy‑price fears helped stocks rebound, leaving the overall monthly decline milder than mid‑month levels had implied.

The overall pattern for March was one of elevated intramonth volatility followed by stabilization and a late‑month rally. Sector performance was uneven: energy and select commodity‑linked and defense‑related names outperformed on the back of higher input prices and geopolitical demand, while rate‑sensitive areas and some high‑growth technology stocks lagged.

Despite the shocks, the U.S. economic data backdrop remained relatively stable through the latest published releases. Real‑time indicators still pointed to moderate growth, supported by resilient consumer spending and labor‑market conditions, even as higher gasoline and food prices threatened to squeeze household budgets over time. For now, markets are balancing the near‑term drag from the energy shock and geopolitical uncertainty against the underlying strength of the domestic economy and expectations that policymakers will adjust as needed if conditions materially deteriorate.

We are closely following developments in the Middle East, the trajectory of inflation and how markets are digesting these events, with an eye on what truly matters over full cycles rather than individual headlines. Our team remains grounded in a disciplined, long‑term investment process so that portfolios stay aligned with your objectives even as conditions evolve.