Dire Strait Comedian Jon Stewart laments that war is God’s way of teaching Americans geography. While no laughing matter, Americans have indeed received a crash course in geography—and economics—since the war with Iran erupted on February 28.
What began as a regional conflict has quickly evolved into a global macro event. Markets spent much of the past 30 days recalibrating—not around earnings or valuations, but around oil flows, shipping lanes, and the uncertain path of escalation. The Strait of Hormuz, once a line on a map, is now a daily variable in asset pricing.
What began as a regional conflict has quickly evolved into a global macro event. Markets spent much of the past 30 days recalibrating—not around earnings or valuations, but around oil flows, shipping lanes, and the uncertain path of escalation. The Strait of Hormuz, once a line on a map, is now a daily variable in asset pricing.
March, in Review
After brushing record territory earlier in the quarter, equities turned lower through March in a steady, grinding fashion. As of the March 30 close, all three indices—the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average—are now in correction territory, defined as a decline of at least 10% from recent peaks.
Importantly, this has not been a disorderly selloff. There has been no capitulation, no panic flush—just a persistent repricing of risk. As CNBC’s Mike Santoli noted, the market has entered that uncomfortable phase where declines feel controlled, but conviction begins to erode.
That distinction matters. Sharp selloffs tend to reset expectations quickly. Slow ones tend to linger.
Update (March 31): Markets are moving higher today on unconfirmed reports that Iran’s leadership may be open to ending the conflict under certain guarantees—something the regime had hinted at earlier this month. Whether the reports prove accurate or not, the reaction is instructive: in an environment like this, sentiment can turn on a headline.
The Drivers Now
Geopolitics and Oil
The most immediate driver has been energy. Oil prices have surged dramatically, with Brent crude posting one of its largest monthly increases on record as the conflict disrupted flows through the Persian Gulf.
That surge is doing double duty—pushing inflation expectations higher while simultaneously threatening growth. Higher fuel costs ripple through transportation, manufacturing, and consumer spending. Historically, that combination has not been kind to equities.
Markets, in effect, are attempting to price a moving target: a conflict that could resolve quickly—or widen unpredictably. Until that range narrows, a risk premium remains embedded in energy and, by extension, in stocks.
The Federal Reserve: Stuck in Neutral
The Federal Reserve has responded by staying put.
Rates were held steady in March, with policymakers emphasizing uncertainty above all else. Higher oil prices complicate the picture. They are inflationary by nature, even as they risk slowing economic activity. That leaves the Fed caught between mandates, and markets without the policy support that defined much of 2024 and early 2025.
For much of the past year, policy provided a quiet tailwind. Today, it’s more accurately described as absent. The Fed isn’t tightening—but it isn’t coming to the rescue either.
AI, Private Credit, and “Residual Anxiety”
Layered on top of geopolitics is a market already dealing with internal strain.
February introduced the idea that AI may create losers as well as winners. March extended that concern into adjacent areas—private credit, software, and any business model dependent on cheap capital or future assumptions.
As Olaolu Aganga, head of portfolio construction for Citigroup's wealth-management division, put it, “It’s only March, and we’ve had AI angst, private credit angst, and now we have a war.”
That accumulation matters. Markets can absorb one source of uncertainty. Several at once tend to reinforce each other.
Going Forward
The market’s direction from here hinges less on earnings—which remain relatively stable—and more on resolution. There are, broadly, three paths that could shift sentiment:
That doesn’t preclude rallies. In fact, oversold conditions could produce sharp, short-term rebounds. But until the underlying uncertainties begin to resolve, those moves are likely to be tactical rather than durable.
That said, not all views are uniformly cautious. Fundstrat’s Tom Lee has suggested that while the Iran conflict is dominating the near-term narrative, markets will ultimately shift focus back toward opportunity in the second half of the year—assuming conditions stabilize.
That’s the tension: short-term uncertainty versus longer-term earnings resilience—and a resumption of the bull.
And For What It’s Worth…
As reported in The Week, a Chicago-area man is suing an animal sanctuary for the return of his “emotional support hog.” Kenneth Mayle says he acquired Chief Wiggum as a piglet in 2016 and surrendered him to the sanctuary while experiencing “temporary housing difficulties” in 2018. Those difficulties have been resolved, says Mayle, yet the sanctuary refuses to return his now 330-pound hog, which Mayle says was trained to provide “therapeutical benefits, including massage therapy.”
So, a heads up to all the software engineers seeking a career alternative immune to AI. While massage therapy might have looked like an option, we see now its future is threatened as well… by swine.
_____
As noted before, long term, the strategies will get the trends right. Short term, there may be a miss or two as the market juggles conflicting signals. So keep allocations of strategies reasonable within your portfolio, and remember that protection remains paramount.
--David
After brushing record territory earlier in the quarter, equities turned lower through March in a steady, grinding fashion. As of the March 30 close, all three indices—the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average—are now in correction territory, defined as a decline of at least 10% from recent peaks.
Importantly, this has not been a disorderly selloff. There has been no capitulation, no panic flush—just a persistent repricing of risk. As CNBC’s Mike Santoli noted, the market has entered that uncomfortable phase where declines feel controlled, but conviction begins to erode.
That distinction matters. Sharp selloffs tend to reset expectations quickly. Slow ones tend to linger.
Update (March 31): Markets are moving higher today on unconfirmed reports that Iran’s leadership may be open to ending the conflict under certain guarantees—something the regime had hinted at earlier this month. Whether the reports prove accurate or not, the reaction is instructive: in an environment like this, sentiment can turn on a headline.
The Drivers Now
Geopolitics and Oil
The most immediate driver has been energy. Oil prices have surged dramatically, with Brent crude posting one of its largest monthly increases on record as the conflict disrupted flows through the Persian Gulf.
That surge is doing double duty—pushing inflation expectations higher while simultaneously threatening growth. Higher fuel costs ripple through transportation, manufacturing, and consumer spending. Historically, that combination has not been kind to equities.
Markets, in effect, are attempting to price a moving target: a conflict that could resolve quickly—or widen unpredictably. Until that range narrows, a risk premium remains embedded in energy and, by extension, in stocks.
The Federal Reserve: Stuck in Neutral
The Federal Reserve has responded by staying put.
Rates were held steady in March, with policymakers emphasizing uncertainty above all else. Higher oil prices complicate the picture. They are inflationary by nature, even as they risk slowing economic activity. That leaves the Fed caught between mandates, and markets without the policy support that defined much of 2024 and early 2025.
For much of the past year, policy provided a quiet tailwind. Today, it’s more accurately described as absent. The Fed isn’t tightening—but it isn’t coming to the rescue either.
AI, Private Credit, and “Residual Anxiety”
Layered on top of geopolitics is a market already dealing with internal strain.
February introduced the idea that AI may create losers as well as winners. March extended that concern into adjacent areas—private credit, software, and any business model dependent on cheap capital or future assumptions.
As Olaolu Aganga, head of portfolio construction for Citigroup's wealth-management division, put it, “It’s only March, and we’ve had AI angst, private credit angst, and now we have a war.”
That accumulation matters. Markets can absorb one source of uncertainty. Several at once tend to reinforce each other.
Going Forward
The market’s direction from here hinges less on earnings—which remain relatively stable—and more on resolution. There are, broadly, three paths that could shift sentiment:
- De-escalation in the Middle East, leading to lower oil prices and a rapid compression of the geopolitical risk premium
- A softer inflation trend, reopening the door to Federal Reserve easing
- Policy intervention, either fiscal or monetary, should financial conditions tighten further
That doesn’t preclude rallies. In fact, oversold conditions could produce sharp, short-term rebounds. But until the underlying uncertainties begin to resolve, those moves are likely to be tactical rather than durable.
That said, not all views are uniformly cautious. Fundstrat’s Tom Lee has suggested that while the Iran conflict is dominating the near-term narrative, markets will ultimately shift focus back toward opportunity in the second half of the year—assuming conditions stabilize.
That’s the tension: short-term uncertainty versus longer-term earnings resilience—and a resumption of the bull.
And For What It’s Worth…
As reported in The Week, a Chicago-area man is suing an animal sanctuary for the return of his “emotional support hog.” Kenneth Mayle says he acquired Chief Wiggum as a piglet in 2016 and surrendered him to the sanctuary while experiencing “temporary housing difficulties” in 2018. Those difficulties have been resolved, says Mayle, yet the sanctuary refuses to return his now 330-pound hog, which Mayle says was trained to provide “therapeutical benefits, including massage therapy.”
So, a heads up to all the software engineers seeking a career alternative immune to AI. While massage therapy might have looked like an option, we see now its future is threatened as well… by swine.
_____
As noted before, long term, the strategies will get the trends right. Short term, there may be a miss or two as the market juggles conflicting signals. So keep allocations of strategies reasonable within your portfolio, and remember that protection remains paramount.
--David
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