Published March 6, 2026
Markets have been amazingly resilient over the past year. They bounced back very quickly from the Tariff Tantrum in April and have managed to post gains despite increasing uncertainty. That uncertainty has hit very high levels this week. War in Iran closed the oil-dependent Strait of Hormuz and sent oil prices up almost +40% in one week. Friday delivered a bad monthly jobs report showing the U.S. losing jobs and unemployment ticking higher. It’s a double whammy for investors.
The poor employment report would normally send bond yields lower. But with oil prices surging, higher inflation is driving bond yields UP not down. Higher yields equal lower bond prices. So, investors are losing money on bonds while the stock market also sells off on the hit to projected global growth. High-flying international stocks, the leaders so far in 2026, have been hit hard giving back almost all of their year-to-date gains in a matter of a week.
Here is Delta Research’s take on the matter:
“The pace of news from the U.S. conflict with Iran is moving at a rapid pace. Such conflicts create uncertainty which markets dislike. When outcomes are unclear, investors often reduce risk. As clarity replaces uncertainty, risk assets tend to recover.
Among a variety of concerns is the fear that the Strait of Hormuz could be closed to energy shipments for a sustained period. Roughly 20% of the world’s supply of oil and liquid natural gas (LNG) flows through this narrow waterway next to Iran and only one- quarter of those shipments have viable alternative export routes.
Europe and Asia are net importers of oil and natural gas. Elevated prices resulting from curtailed supply risk slowing GDP growth and increasing inflation.
The U.S., however, is the largest oil and natural gas producer in the world and a net exporter of both. Rising oil and gas prices still harm the U.S. economy, but generally to a much smaller degree than in most other regions.
Investment bank Goldman Sachs estimates that a sustained 10% increase in oil prices raises headline inflation in the United States by about 0.2% and reduces GDP growth by roughly 0.1%. Neither impact materially alters the underlying growth trend of corporate earnings and the economy.
Fourth-quarter 2025 earnings growth is expected to be about 14%. This is the fifth consecutive quarter of double-digit earnings growth. Looking ahead, consensus analyst earnings expectations for the S&P 500 over the next twelve months reached a new all-time high last week.
Because developments in Iran are unfolding rapidly, rather than focusing on the worry of the day, it may be more helpful to look to history for guidance on how such conflicts typically affect the stock market.
Over the past 40 years, there have been 21 U.S. airstrike campaigns in the Middle East and North Africa oil-producing regions. In the immediate aftermath, equities typically declined while crude oil, gold, bonds and the U.S. dollar rallied. However, eight weeks after the start of the airstrikes, the S&P 500 was higher 95% of the time with an average gain of ~4%.
Although the rapid pace of headline news often increases volatility, the robust macroeconomic environment is likely to limit the magnitude and duration of any drawdown. The ISM Non-Manufacturing Index reported this week came in well above expectations at 56.1, the highest level since July 2022. Notably, the underlying components of the report was strong, with increases in business activity, new orders and employment components.
On Friday, February 27, before the U.S. launched airstrikes against Iran, the S&P 500 closed at 6,878.88. As of this writing, the S&P 500 is trading within 2% of that level.
The investor’s challenge, as always, is separating risk from noise. When uncertainty rises, prices often fall. Sometimes that’s justified. Sometimes it’s an opportunity. The key is to remain disciplined, focus on fundamentals, and avoid letting short-term emotion dictate long-term decisions.”
Market Update
Well that was quite a week of trading! Stocks opened Monday’s trade essentially flat with a +0.1% advance as investors tried to sort out the implications of the U.S.-Iran war. Stocks had opened notably lower on an +8% surge in oil prices which caused 10-year Treasury bond yields to tick back above 4%. Tuesday found buyers stepping in to again reverse significant opening bell weakness. This time, the reversal pared losses down to -1%. However, international stocks were hammered by -5% as limited oil and gas supply is seen especially hurting non-U.S. economies. But Wednesday investors appeared to take the war news in stride buying Tuesday’s dip and pushing stock indexes higher by +0.8%. It was a one-day wonder though with the selling resuming Thursday. Oil prices and interest rates continued rising while former Goldman Sachs chief Lloyd Blankfein beat the drum on private credit concerns. The Dow Industrials tumbled -1.5% to 48000, the level at which the index began the year and viewed as a key support level. That level was breached Friday. A Qatari oil minister noted that oil prices could reach $150, a level substantially higher than they sit currently. That coincided with a disappointing monthly jobs report showing jobs being lost from the prior month. The combination of negative news events sent stocks gapping down at the open. Rebound attempts through the day were given back by day’s end with investors shy to hold positions ahead of potential market-moving weekend news. The volatility index (VIX) spiked +25% Friday. The weak jobs report did manage to keep interest rates in check for the first time this week. Stocks closed the day down -1.5%.
A difficult week for investors as expectations for a prolonged war impasse took hold. The S&P 500 fell -1.98%. The Nasdaq 100 (QQQ) slipped -1.24% as investors were back to viewing Mag 7 stocks as something of a relative safe haven. Interest-rate sensitive small cap stocks tumbled -4.02%. International stocks suffered a near -7% plunge after rising for fourteen straight weeks.
Warm wishes and until next week.