Market Update March 2026

Markets have reacted sharply over the past three weeks to the war in Iran, especially to the effective shutdown of the Strait of Hormuz.

Here are some of the biggest moves from peak to trough or vice versa since the war started, as of Friday, March 20th’s close:

• Gold: -16.5%
• International Developed (USD): -11.5%
• Emerging Markets (USD): -11%
• Russell 2000: -10%
• All Country World Index (USD): -8.5%
• S&P 500: -6.5%
• U.S. 10 Year Treasury prices: -4.4%
• U.S. Dollar: +4.6%
• Brent Crude Oil: +59%

Roughly 20% of global oil supply flows through the Strait of Hormuz. Oil has risen sharply in response, with refined products like jet fuel moving even more. What has long been discussed as a hypothetical supply shock in oil trader job interviews is now playing out in real time. Initially, the consensus was that this would be a short-term disruption rather than a prolonged closure that results in persistently higher oil prices. However, the longer the Strait stays closed, and oil prices elevated, the bigger the downstream economic impacts.

After the most recent Federal Reserve meeting, Chair Jerome Powell said that even before the attacks on Iran, inflation was lingering longer than the committee hoped. “The thing that’s really important that we see this year is progress on inflation,” Powell said. “If we don’t see that progress, then you won’t see the rate cut.”

The new concern is that if the war drags out and the Strait stays closed for a prolonged period, higher oil prices could push prices higher across the rest of the economy. Prior to the meeting, markets were pricing as many as three quarter point rate cuts by year end. Now, they are pricing one cut by year end, with a coin flip chance that the Fed actually hikes before October.

This dramatic repricing of oil and the path of interest rates has reverberated through gold, the dollar, and equities globally.

Traditionally, gold acts as a safe haven during crises like this. However, over the past year, gold has disconnected from its usual fundamentals, appreciating from approximately $2,655 per ounce at the beginning of 2025 to over $5,000/oz recently. Part of gold’s rally was driven by expectations of Federal Reserve rate cuts, and the sharp reversal toward potential rate hikes helps explain the recent decline.

Like gold’s move higher, international developed stocks were among the best performing markets over the past year, particularly in Asia. South Korea and Japan both saw strong gains, (+76% and +26%, respectively) driven by a weaker dollar and the AI boom. These economies are heavily dependent on imported energy, with over 90% of oil imports coming from the Middle East. The disruption of the Strait of Hormuz disproportionately impacts them, and this supply disruption is acutely reflected in the recent stock declines.

The Russell 2000, an index of smaller U.S. companies, had a strong start to 2026 driven by a broadening stock market and expectations of lower interest rates. These companies tend to rely more on floating rate debt than larger companies, making them particularly sensitive to changes in rate expectations, which helps explain the move.

One narrative circulating in both financial and policy circles is that the attacks on Iran are part of a broader strategy of applying pressure on China’s oil supply. The Center on Global Energy Policy estimates that 22% of China’s oil imports are sanctioned or “shadow” oil from Iran, Russia, and Venezuela. This estimate includes 1.38 million barrels per day (bpd) from Iran and 389,000 bpd from Venezuela, and at least 800,000 bpd of oil from Russia. The US has attacked every one of those countries that do not have nuclear weapons.

If energy flows remain constrained, that creates additional economic pressure on China at a time when trade and geopolitical negotiations are ongoing, especially ahead of the Trump-Xi summit that has been postponed from the end of this month. Perhaps Trump uses the summit as an opportunity to extract concessions from Xi then declares victory in Iran.

Although, as I am sending this email, Donald Trump is posting about “good” talks between the U.S. and Iran, while Iran denies any communication.

Could this be the return of TACO?

Most importantly, we must remember that a well-constructed financial plan and investment strategy is built to withstand unexpected times like these.