The joint attack on the Iranian military by the United States and Israel on February 28,2026 produced market declines in capital markets around the world. Equity markets were all down in March with a few markets holding onto small net gains for the calendar quarter. The S&P Index was down 4.6%, the Dow Jones industrial Index was down 3.6% and the NASDAQ index was down 7.1%. Mid-Cap stocks were down 1.0% and Small-Cap stocks were up 1.5% for the quarter. Developed International markets were up 1.4% and Emerging Markets were up 3.8%, the best performing equity index among the group.
An interesting comparison can be made with the market reaction to the Russian invasion of Ukraine in February 2022, which produced much higher market losses than those incurred as a result of this current conflict. The principal difference seems to be that the United States was going through an inflationary spike in 2022, while the macro-economic indicators are in much better balance now.
The most obvious effect of the recent closing of Iran’s Strait of Hormuz was the 79% rise in the price of a barrel of oil. Another significant impact of the closing was that nitrogen based fertilizer prices climbed by more than 50% as nearly one-third of this worldwide commodity was blocked from export to many countries at the beginning of planting season.
Aside from commodity prices increasing, the effect of the closing on interest rates was relatively minor, with the U.S. Treasury 10-year note increasing by just 0.15% between December 31,2025 and March 31, 2026. The Federal Reserve chose not to change interest rate levels at its March meeting, weighing that the inflationary risk from the rising price of oil was at least partially offset by the increased possibility of a recession and the recent sluggish employment statistics.
One thing is very clear, the quarterly results that companies report for the first calendar quarter will be largely ignored as analysts focus on how companies expect to deal with the economic fallout from the conflict in the Middle East.
Meanwhile, the impact of Artificial Intelligence (AI) on corporate productivity and profitability is receiving less coverage than the geopolitical impact of AI on the world economy. We believe the onset of the adoption of Artificial Intelligence throughout our economy and our society will provide many transformational changes. We are committed to investing so as to participate in these seismic changes in the investment landscape for our client portfolios.