April 6, 2026
Iran War Drags Down Stocks in March
The escalation of conflict in Iran drove a sharp rise in global oil prices during March, pressuring equity markets across the board. Major indexes moved lower, with the S&P 500 declining 5.1%, the Nasdaq falling 4.8%, and the Dow Jones Industrial Average down 5.2% for the month. These numbers could have been worse for March, but on the 31st markets rallied into quarter end, including a 2.9% gain in the S&P 500.
Much of the volatility was driven by low probability narratives surrounding the conflict. Fear driven swings pushed markets lower as investors attempted to price in uncertain geopolitical outcomes. Periods like this are not unusual. Geopolitical shocks tend to be short lived in the eyes of the market, and as uncertainty fades, focus typically returns to measurable economic impact. In our view, the conditions supporting the bull market remain intact.
This has been a valuation led sell off rather than a deterioration in fundamentals. Earnings and revenue expectations for US companies have remained strong even as stock prices declined. These types of resets are often constructive, helping realign valuations and extend a bull market rather than end it.
Energy markets were central to the volatility. Supply disruption concerns pushed oil prices higher, which in turn pressured interest rates and inflation expectations. Treasury yields moved up as investors reassessed the Fed’s path, as persistent energy inflation could delay future rate cuts. Markets are still determining whether this is a temporary shock or something more lasting.
Corporate earnings remain the primary driver of equity markets along with interest rates. According to FactSet, the S&P 500 is expected to deliver year-over-year earnings growth of 13.2% for 2026, up from 12.8% at the start of the year. If realized, this would mark the sixth consecutive quarter of double-digit earnings growth, reinforcing that the underlying engine of the market remains strong.
At the same time, there are additional areas of risk outside of the Iran war worth monitoring that could drive prices lower. Certain segments of the consumer are showing signs of strain, particularly with rising credit card and auto loan delinquencies, according to Federal Reserve data. Private credit markets also warrant attention, as tighter financial conditions could expose pockets of risk that have not been tested in a downturn.
As we look ahead, the market remains on solid footing but is more sensitive to news and data. Recent volatility reflects an adjustment to a more complex global backdrop rather than a breakdown in the economy.
It is possible in the near term the stock and bond markets will get worse before they get better, as the impact of higher oil prices and inflation could continue longer than the market anticipates, affecting any rate-cut possibilities. However, the market does not need a definitive end to the conflict in Iran to stabilize. What it needs is a reduction in uncertainty. Historically, markets can absorb geopolitical events relatively well once there is greater clarity around potential outcomes, even if the situation itself is unresolved.
We remain focused on positioning portfolios around durable earnings growth while using volatility as an opportunity to rebalance and upgrade where appropriate.
