Market Commentary

For the week ending 3/13/2026

 

Volatility continued to plague global financial markets as investors reacted to the escalating geopolitical conflict with Iran and its subsequent impact on energy prices.

While stocks staged a recovery on Monday afternoon on hopes the war might not last quite as long as originally expected, they slid back as it became clear that Iran’s government might not be at risk of collapse, and oil prices spiked again. These higher oil prices, persistent inflation concerns, and a shift in Federal Reserve expectations all weighed on investor sentiment. Each of the three U.S. large-cap indices are now reflecting a slightly negative year-to-date return.

The War in Iran remains the primary catalyst for market swings. Last Tuesday saw the heaviest barrage of airstrikes on Iran so far. However, by Thursday renewed concerns saw the markets drop again as oil prices surged. Airline shares were particularly hard hit this week by rising fuel costs, resulting in rising ticket prices. Iran selected Mojtaba Khamenei, the son of the former supreme leader, as its new supreme leader, despite Trump’s opposition. Khamenei’s selection as the new supreme leader signals Iran’s intention to maintain its hardline stance and further escalated tensions. A U.S. intelligence report argues even a large-scale assault is unlikely to oust Iran’s entrenched regime and Iran’s government is not at risk of collapse. Iran’s new supreme leader said the Strait of Hormuz must remain closed as a ‘tool to pressure enemy.’ Iran attacked at least six cargo ships in and near the Strait of Hormuz. Iran then warned that any vessel that intends to pass through Strait must obtain permission from Iran. Energy Secretary Wright says the U.S. Navy is ‘not ready’ to escort oil tankers through the Strait yet, noting they may be ready by the end of the month. Reports also indicate that Iran plans to start laying mines in Strait of Hormuz. U.S. forces have since eliminated at least 16 Iranian mine-laying vessels.

Energy markets became the central focus as crude oil prices spiked past $100 a barrel early Monday morning, briefly nearing $120. This rapid surge caused fears that it could negatively impact global growth, with analysts warning that sustained oil prices at these levels could be a significant drag on broader economic activity, and fuel higher inflation. The Strait of Hormuz remained essentially halted throughout the week, with no real end in sight. Most Middle East oil producers have paused or reduced production, as they reach maximum storage capacity.

The International Energy Agency’s (IEA) 32 members unanimously agreed to release 400M barrels from emergency reserves to ease Middle East-related oil disruptions. This will be the largest-ever strategic oil release by the IEA. President Trump also ordered the release of 172 million barrels of oil from the U.S. Strategic Petroleum Reserve to help cut energy costs. In theory this additional supply of oil, should lower oil prices; however as with past oil reserve releases, oil prices actually rose after these announcements.

As energy-driven inflation fears mounted, market expectations for the Federal Reserve to cut interest rates shifted significantly. While some economists still predicted a June cut, most traders have priced out the likelihood of multiple cuts this year. Now the market’s implied probability of at least a 25-basis point rate cut does not eclipse a 50% chance until the December FOMC meeting, according to the CME FedWatch Tool. Treasury yields moved higher in response, with the 10-year yield rising sharply as the market adjusted to a “higher for longer” interest rate environment.

Wednesday provided Wall Street with the first look at February’s inflation data. Annual headline CPI of 2.4% was a touch below the 2.5% consensus expectations, and Core CPI (which excludes food and energy) was at 2.5%, in-line with consensus and January’s level. Friday’s data revealed that January headline PCE was at 2.8%, just below the 2.9% consensus, and Core PCE was at 3.1%, a bit above the consensus of 2.9%. However, none of this week’s inflation reports reflect the recent surge in energy prices in March, so this data feels rather stale.

Financial firms with exposure to private credit funds specifically struggled this week, with the S&P financials sector down roughly 10% for the year as concerns about loan quality and high interest rates persisted.

Looking ahead, we will continue to monitor the latest developments of the war with Iran.

For the week, the Dow fell -2.0% to 46,558. The S&P 500 dipped -1.6% to 6,632 and the Nasdaq ended the week down -1.3% to 22,105.

Oil spiked 8.6% to $98.71/bbl. Gold slid -1.9% to $5,062/oz. and the yield on the Ten-Year Treasury rose to 4.29%.

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