Asset Management
03/30/2026 Market Strategy
March 30, 2026
Riders on the Storm Revisited
Complexities of Middle East Conflict Extend Market Turmoil
Key Takeaways
- The war in the Middle East enters its fifth week and is likely to persist as the key concern for the markets and global economic outlook.
- The energy sector has topped S&P 500 sector performance since the outbreak of the hostilities.
- Several other sectors that were disfavored last year (e.g. materials, consumer staples and real estate) have shined as investors move away from over -concentrated positions to emphasize diversification in a transitional environment.
- Crude oil prices rose further last week, bringing further pain to energy -dependent sectors and nations.
- The week ahead brings the first readings on economic activity in March with the ISM survey of manufacturers as well as the Nonfarm Payroll Survey on Friday, when the equity market will be closed in observance of the Good Friday holiday.
As the conflict with Iran enters its fifth week , the relative performance among stateside US major stock indexes from a perspective of sectors, market capitalizations , and style reflect increased concern about the time it will take to arrive at a resolution to the conflict. For stability to be restored to markets , we believe a cease -fire to facilitate negotiations to allow a reopening of the Strait of Hormuz would be a first start.
Market participants have been reminded of the importance of fossil fuel and its role as the key lubricant to the global economy.
International markets , particularly those dependent on imported oil and LNG from the Middle East , are running their own gauntlet of uncertainty compounded by inflation risk linked to the price of oil which has risen dramatically since the current conflict began.
Fossil Fuels Remain Key to Global Growth
Since the outbreak of hostilities in the Middle East on February 27, market participants have been reminded of the importance of fossil fuel and its role as the key lubricant to the global economy notwithstanding all the progress made in the development of alternative energies over the last decade.
The surge in the price of oil this year has found emphasis in its impact on countries across the regions of the world dependent on imports of oil from the Middle East.
From a currency perspective, the strengthening of the dollar has underscored the importance of the US currency in times of elevated global uncertainty, and the reliance global trade and central banks worldwide have on the greenback.
Last Week
The Dow Jones Industrial average, the S&P 500, and the NASDAQ Composite respectively shed 0.9%, 2.1%, and 3.2% over the week that ended on March 27.
In the same period the S&P 400 (mid-caps), the S&P 600 (small caps) and the Russell 2000 (small caps) managed to retain some earlier gains posting gains of 0.4%, 1.1%, and 0. 5% respectively as traders and investors continued rotation and rebalancing of equity positioning.
Year To Date
The Dow Jones Industrial average, the S&P 500, the NASDAQ Composite, and the Russell 2000 (small caps) as of last Friday’s close showed respective loses on a year-to-date basis of 6%, 7%, 9. 9% , and 1.3% as markets continued to navigate turbulence generated from heightened geopolitical risks, stickier than expected inflation along with expectations that the Fed is now less likely to cut rates twice this year as had been earlier expected (and priced into the forward markets) as the economy reflected signs of slowing.
Noteworthy is that the S&P 400 (mid -caps) and the S&P 600 (small-caps) still manage to eke out gains in the year-to-date period through last Friday of 0. 2% and 1. 1% respectively, notwithstanding the selling pressure they have felt.
Geopolitics Remain on the Front Burner
With increased damage to public, industrial, and energy infrastructure as well as residential property in the Middle East, concern remains elevated not only about regional growth but global growth as well.
As a result, the MSCI EAFE, MSCI Emerging Market and the MSCI Frontier Market indexes have retreated from earlier highs this year. The MSCI EAFE and the MSCI Frontier Market indexes show respective declines of 1.8% and 1. 7% in US dollar terms since the start of the year.
The MSCI Emerging Market index has shed much of its earlier 15.3% gain from the start of the year to show a rise in the year-to-date of 2.3% as of last Friday.
Since the February 27 outbreak of hostilities through last Friday, MSCI EAFE (developed international markets ex -US and Canada), the MSCI Emerging Markets and the MSCI Frontier Markets have shed respectively 10.7%, 10. 8 %, and 7.3% in US currency terms as many of the countries contained in those indices depend on imported oil.
Other Uncertainties
Concerns ranging from how long it will take the massive investments going into AI by technology’s hyper -scalers and “lesser scalers” to turn profitable --along with questions on the quality of lending in the consumer credit space-- remain in place while projected risks are pondered and sorted. We expect that issues currently worrying the market in tech and private credit will ultimately prove to be idiosyncratic rather than systemic in nature.
Other Uncertainties
As daunting as the “bear case” outcome to the current challenges might appear, history suggests that opportunity might be close by on the landscape --- even as the proverbial disclaimer reminds us that “past performance is no guarantee of future results.”
As we enter the fifth week of the conflict in the Middle East and concerns about the challenges to and from AI remain active, we are still positive on our outlook for the markets in 2026 with prospects for economic growth at a sustainable pace ahead as fundamentals are still in our view resilient and in good stead supported by responsible monetary policy stateside and in other parts around the globe.
As investors with intermediate and longer - term goals we remain focused on the signal and not the noise (while not disregarding the latter) in a period of transition driven by monetary policy, economic and corporate fundamentals, fiscal policy, geopolitical risk and watershed innovation.
Traders, skeptics and nervous investors are in our view likely to continue this week to look for any catalysts to surface that could be seen as opportunity to take profits on equity positions without FOMO (fear of missing out) in the near term.
We suggest intermediate - and longer -term investors persist in looking for “babies that get thrown out with the bath water” ― the quality stocks and other quality assets that can get jostled in market downdrafts.
We remain positive in our outlook for the markets and the US economy this year with “resilience” the operative word for providing the market with enough opportunities to climb the proverbial “wall of worry.”
We continue to overweight equities, favor diversification across asset classes, sectors, market capitalizations, and style and see fixed income as complementary to equities and useful for current income and diversification.
Name:
John Stoltzfus
Title:Chief Investment Strategist, Oppenheimer Asset Management Inc.
John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.
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