By Case Eichenberger, CIMA® | Chief Investment Officer, RetirePath Advisors
Published: April 2026
March was a month defined by geopolitical shock and market resilience in equal measure. The conflict in Iran and the Middle East — which was just emerging as February closed — moved to center stage and drove meaningful volatility across global asset classes. Even so, the ultimate impact to portfolios was more contained than the headlines might suggest, and the underlying data on corporate earnings continues to point in an encouraging direction.
March Performance at a Glance
Stocks fell approximately 5% across most major U.S. categories in March. The S&P 500 finished the month down almost exactly 5%, and small and mid-cap stocks declined by a similar amount. International stocks bore the brunt of the selloff, falling roughly 11% for the month — a reflection of Europe and Asia's significantly greater dependence on Middle Eastern energy and Strait of Hormuz shipping lanes. Bonds declined modestly, down around 2%, but once again demonstrated their value as a buffer, outperforming equities by a meaningful margin. Cash remained positive.
Year-to-date through the end of the first quarter, the S&P 500 is down approximately 4%, small and mid-caps remain marginally positive, and international stocks sit just below flat. Bonds are roughly flat, and cash is positive. It has been a mixed start to 2026 — though the picture beneath the surface tells a more nuanced story.
The Strait of Hormuz: Why This Conflict Hit Markets Hard
The root cause of March's volatility traces directly to the effective closure of the Strait of Hormuz — a narrow but critically important waterway through which approximately 20 to 21 million barrels of oil pass every single day. That represents roughly one in every five barrels of oil consumed globally. When the conflict escalated and Iran signaled it may deploy mines and target vessels attempting to transit the strait, shipping traffic fell sharply as operators chose to keep their tankers out of harm's way rather than risk damage or loss.
The result was a rapid spike in global oil prices. U.S. WTI crude climbed to roughly $90–$100 per barrel, while international Brent crude reached the $110–$120 range. At the pump, Americans felt the impact directly — gas prices rose to close to $4 per gallon, up more than a dollar from the lows earlier in the year. Higher energy costs eat into consumer purchasing power and complicate the inflation picture for the Federal Reserve.
A Cushion America Didn't Have in the 1970s
The selloff, while real, was far less severe than comparable energy shocks of the past — and for good reason. The United States now produces approximately 20 million barrels of oil per day, nearly double the output of second-place Saudi Arabia, making it the world's largest oil producer. Beyond production, American households have dramatically reduced their energy footprint — energy-related spending as a share of household budgets has fallen from roughly 42% in the mid-20th century to around 24% today. These two factors together help explain why the stock market found a floor, with the S&P 500 pulling back roughly 9–10% from its highs at the worst point rather than entering a deeper decline.
Inflation Expectations and the Fed: A Tailwind Under Pressure
The energy price spike pushed near-term inflation expectations higher — the 5-year inflation breakeven moved from roughly 2.4% to 2.6% after the conflict began. While not dramatic, that move is in the wrong direction for a Federal Reserve that had been on a gradual easing path. Critically, however, longer-term inflation expectations — the "5-year, 5-year forward" measure — remained anchored or moved slightly lower, signaling that markets view this as a temporary supply shock rather than a structural inflation problem.
Fed rate cut expectations, which had been pricing in two to three cuts entering the year, compressed sharply to zero to one following the conflict's escalation. The Fed held its stance at its most recent meeting, still projecting one cut for the year. That shift represents a meaningful change in the tailwind discussed at the start of 2026.
The Silver Lining: Earnings Expectations Are Still Rising
Despite all the noise, Wall Street analysts have continued to raise their corporate earnings forecasts for both 2026 and 2027. The slope of earnings estimates for S&P 500 companies is still trending higher — with double-digit earnings growth still the base case for the year. History is consistent on this point: stock prices tend to follow earnings over time, and the fact that analyst estimates have held firm through this period of geopolitical turbulence is a meaningful data point.
As the final day of March demonstrated, markets can move quickly when geopolitical signals improve. Stocks rallied materially on the last trading day of the month after both the U.S. and Iranian leadership signaled openness to ending hostilities and reopening the strait. History consistently shows that geopolitical-driven volatility tends to be temporary — markets have navigated wars, conflicts, and crises throughout their history, and the long-run direction has been determined by corporate earnings and economic growth, not headlines.
Bottom Line
March was a difficult month, but the foundation underneath the market remains intact. Energy independence has cushioned the blow. Earnings expectations have held. And diplomatic signals at month-end suggest the conflict may be closer to resolution than the headlines implied. As always, discipline and a long-term perspective are your most durable advantages. With midterm elections also moving into focus for the months ahead, we will continue to monitor developments closely and keep you informed. Please don't hesitate to reach out with any questions about your specific plan.
Index Benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index.
The Standard & Poor's 500 (S&P 500) is a market-cap weighted index comprised of the common stocks of 500 leading companies in leading industries of the U.S. economy.
The Russell 2500™ Index measures the performance of the small to midcap
segment of the US equity universe, commonly referred to as "smid" cap. The Russell 2500 Index is a subset of the Russell 3000® Index. It includes approximately 2500 of the smallest securities based on a combination of their market cap and current index membership.
The MSCI ACWI (Morgan Stanley Capital International All Country World Index) Ex-U.S.® Index is a stock market index comprising of non-U.S. stocks from 22 developed markets and 24 emerging markets.
The Bloomberg U.S. Aggregate Bond® Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States. Investors frequently use the index as a stand-in for measuring the performance of the U.S. bond market.
West Texas Intermediate Index (WTI), is the main oil benchmark for North America as it is sourced from the United States, primarily from the Permian Basin. The oil comes mainly from Texas.
Brent crude oil is a blended oil (a mix of brent, forties, oseberg and ekofisk) drilled from below the North Sea. It is popularly refined into diesel fuel and gasoline. In trading, Brent is one of the benchmarks for oil in the wider market, such as the Middle East, Europe and Africa. It is one of three major oil benchmarks used by those trading oil contracts, futures and derivatives. The other two major benchmarks are West Texas Intermediate (WTI) and Dubai/Oman, though there are many smaller oil varieties traded as well.
Kalshi is the first regulated, specialized exchange in the US that allows users to trade directly on the outcome of real-world events, such as politics, economics, weather, and sports. Founded in 2018, it operates as a prediction market regulated by the Commodity Futures Trading Commission (CFTC)