Weekly Market Recap

Week Ending March 7, 2026

THIS WEEK IN REVIEW

Markets experienced one of the most volatile weeks in recent years as the Iran conflict escalated dramatically, sending oil prices surging by a historic 35% and triggering sharp declines across equity markets. The S&P 500 plunged 2.1% for the week to close at 6,740, the Nasdaq fell 1.8% to 22,388, and the Dow dropped 2.9% to 47,502. The week was dominated by geopolitical crisis, spiking energy costs, and deteriorating economic data that raised serious concerns about both inflation and growth.

Monday: Initial Reaction to Weekend Strikes

Markets opened Monday attempting to digest the weekend's military strikes on Iran that killed Supreme Leader Ayatollah Ali Khamenei. Initial reactions were mixed—the Dow fell 0.2% (73 points) to 48,905, while the S&P 500 essentially finished flat at 6,882, and the Nasdaq managed a 0.4% gain to 22,749.

President Trump said the operation "was our last, best chance to strike" and anticipated the conflict would last four to six weeks. However, markets quickly focused on four sectors that benefited: Energy stocks surged 2% as oil prices jumped, with Exxon and Chevron gaining about 4% and ConocoPhillips up over 5%. Defense stocks rallied, with Northrop Grumman climbing 6%. Technology held up, with Nvidia advancing nearly 3%. Industrial stocks also gained 1%.

Retail investors poured a record $49 million into the State Street Energy Select Sector SPDR ETF (XLE), surpassing the previous record of $36 million seen in March 2022 following Russia's Ukraine invasion. The XLE climbed 2% Monday and has surged 27% year-to-date.

Travel stocks plummeted on fears of prolonged disruption. United Airlines tumbled over 6%, American and Delta each fell more than 5%, while Marriott slid nearly 5% and Airbnb sank over 3%. Cruise lines continued selling off, with Carnival down 7.6%, Norwegian falling 10.5%, and Royal Caribbean declining 3.3%.

Tuesday-Wednesday: Strait of Hormuz Crisis Escalates

Market anxiety ratcheted higher Tuesday and Wednesday as Iran began attacking tankers attempting to pass through the Strait of Hormuz—a critical transit route for 13 million barrels of oil per day, roughly 15% of global supply. Iranian media reported the strait was effectively closed, with threats to fire on any vessel attempting passage.

Small-cap stocks took outsized hits. The Russell 2000 fell nearly 2% Tuesday, pulling its 2026 gain down to 5%. The index remains the only major benchmark positive for the year but barely. The S&P 500 declined 1.2% Tuesday as concerns mounted about prolonged conflict.

South Korea's Kospi plunged over 12% Wednesday—its worst day in decades—as trading was temporarily halted. SK Hynix and Samsung Electronics, major memory chip suppliers, fell 5% and 7% respectively. Dubai's benchmark index dropped 4.9%, its worst day since May 2022, while Abu Dhabi fell over 3%.

Wednesday brought modest relief as markets rallied on U.S. assurances about securing shipping lanes. The S&P 500 rose 0.78% to 6,870, the Nasdaq gained 1.29% to 22,807, and the Dow added 0.49%. Consumer discretionary stocks popped 2% on hopes the conflict might be contained. Bitcoin surged above $70,000, up nearly 5%, as investors questioned whether it could serve as a "safe haven" alternative to gold.

Treasury Secretary Scott Bessent announced Trump's 15% global tariff would be implemented this week, adding policy uncertainty to geopolitical stress.

Thursday-Friday: Jobs Collapse and Oil Surge

The week's final two days brought devastating news. Friday's employment report showed payrolls fell by 92,000 in February—a shocking decline when 50,000 gains were expected. The unemployment rate rose to 4.4% from 4.3%. December and January payrolls were revised downward by 69,000 combined.

The jobs collapse raised fears that the Iran conflict and spiking oil prices are already damaging the economy. The Atlanta Fed's GDPNow tracker plunged to 2.1% from 3.0% just days earlier, with consumption and investment growth estimates slashed.

Oil prices exploded higher. West Texas Intermediate crude broke $90 per barrel Friday, surging 11.27% for the day after Trump demanded "unconditional surrender" from Iran. For the week, WTI gained an unprecedented 35%—the largest weekly gain since oil futures trading began in 1983. Brent crude advanced 28% for the week to $92.32.

Stocks sold off sharply Friday. The Dow plunged 453 points (0.95%) to 47,502, the S&P 500 fell 1.33% to 6,740, and the Nasdaq dropped 1.59% to 22,388. At session lows, the Dow was down nearly 950 points and the Nasdaq had shed 1.9%.

Understanding U.S. Oil Consumption and Portfolio Impact

To appreciate why oil price spikes matter so much to portfolios, it's important to understand America's energy landscape:

U.S. Oil Consumption Basics: The United States consumes approximately 20 million barrels of oil per day, making it the world's largest oil consumer. This represents roughly 20% of global daily consumption. About 45% of this oil goes to gasoline for vehicles, 20% to diesel fuel for trucks and industrial use, 8% to jet fuel for aviation, and the remainder to heating oil, petrochemicals, and other products.

Despite recent growth in domestic production, the U.S. still imports about 6-8 million barrels daily, meaning roughly 30-40% of consumption comes from foreign sources. The Strait of Hormuz, now threatened by the Iran conflict, is the world's most important oil chokepoint—about 21% of global petroleum passes through this narrow waterway. While the U.S. doesn't import heavily from the Persian Gulf directly, global oil markets are interconnected, so disruptions anywhere affect prices everywhere.

Why Oil Price Shocks Matter for Portfolios:

Direct Consumer Impact: When oil rises from $65 to $90 per barrel (as it did this week), gasoline prices typically increase by 60-75 cents per gallon within weeks. For the average American household driving 12,000 miles annually, this represents roughly $600-800 in additional annual costs—money that won't be spent on discretionary purchases, dining out, or travel. This directly hits consumer discretionary stocks, restaurants, retailers, and entertainment companies.

Inflation Multiplier Effect: Oil doesn't just affect gas pumps. Transportation costs feed into virtually every product price—groceries, manufactured goods, shipping costs, and services. Historically, every $10 increase in oil adds 0.2-0.4% to core inflation. At current levels, we could see 0.5-1.0% added to inflation readings over the next 3-6 months, forcing the Federal Reserve to delay or abandon rate cuts despite economic weakness.

Stagflation Risk: The combination of rising oil prices, falling employment (Friday's -92,000 payrolls), and slowing growth (Atlanta Fed GDP estimate cut from 3.0% to 2.1%) creates a classic stagflation scenario—the worst environment for both stocks and bonds. The 1970s oil shocks demonstrated how energy price spikes can trigger prolonged economic malaise with persistently high inflation and weak growth.

Sector Winners and Losers: Energy stocks have been clear beneficiaries, with the XLE up 27% year-to-date. However, most sectors face headwinds:

• Transportation (airlines, trucking, shipping): Fuel is their largest cost—margins compress dramatically

• Consumer discretionary: Reduced spending power hits retailers, restaurants, leisure

• Industrials: Higher input costs and weaker demand squeeze profits

• Small-caps: Less pricing power and higher vulnerability to economic slowdown

Conversely, energy producers, certain commodity companies, and some defense contractors benefit.

Portfolio Positioning Considerations:

Given current conditions, investors may want to consider:

• Energy Position Management: If energy holdings have appreciated significantly (XLE up 27% YTD), consider taking some profits. Oil at $90+ may not be sustainable if it triggers recession.

• Defensive Sector Allocation: Healthcare, utilities, and consumer staples tend to hold up better during stagflationary periods as they provide essential services with more stable demand.

• Quality Over Cyclicals: Large-cap companies with strong balance sheets, pricing power, and diversified revenue streams are better positioned to weather energy shocks than highly leveraged cyclicals.

• Geographic Diversification: While oil is a global commodity, some international markets may be less impacted depending on their energy independence and economic structure.

• Cash Reserves: Maintaining 10-15% cash allows flexibility to take advantage of opportunities if markets overshoot to the downside, which often happens during geopolitical crises.

• Bond Duration Caution: Rising inflation expectations make long-duration bonds vulnerable. Short-term bonds or Treasury Inflation-Protected Securities (TIPS) may provide better protection.

Bond Market Stress: Treasury yields spiked this week as the 2-10 spread widened in a "bear steepening"—signaling increased inflation expectations. This creates particular stress for banks (net interest margin compression), with all 101 banks in the SPDR S&P Bank ETF declining Friday, down 3.6%.

Historical Context: Previous major oil shocks (1973, 1979, 1990, 2008) typically saw stocks decline 15-30% before stabilizing, though recoveries often came within 6-12 months. The key variable is duration—brief spikes (1990 Gulf War) caused limited damage, while sustained high prices (1970s) led to prolonged bear markets.

Other Market Developments

The VIX volatility index crossed 25 Tuesday, reaching its highest level since November. Gold ended the week down 1.7% at $5,159 despite Friday's 1.58% gain—its first weekly loss in five weeks as some investors took profits. Silver plunged 9.63% for the week, while aluminum surged 9.75%, its largest weekly gain since January 2023.

Memory chip stocks, which had been 2026's best performers on AI demand, sold off sharply. Seagate fell over 7%, Micron and Western Digital declined more than 8%, and SanDisk dropped over 9% despite being up 100% year-to-date.

Investor sentiment has deteriorated markedly, with the AAII bullish percentage falling to just 33.2% from nearly 50% in mid-January.

THE WEEK AHEAD

Markets face critical uncertainty around the Iran conflict's trajectory. Trump's demand for unconditional surrender suggests prolonged military action. The U.S. Navy is preparing to escort tankers through the Strait of Hormuz, but providing safe passage for typical traffic volumes will prove challenging with Iran's asymmetric warfare capabilities.

If the strait remains effectively closed, oil could push toward $100 or higher. Wells Fargo's tail-risk scenario contemplates severe impacts, though their base case still targets the S&P 500 reaching 7,500 by year-end. Goldman Sachs notes only a "severe and sustained" oil price disruption would have large effects on global growth, but we may be approaching that threshold.

The February jobs loss of 92,000 is particularly concerning—it suggests economic damage is already materializing. Next week brings additional economic data that will clarify whether this represents the start of a deeper slowdown.

What We're Watching

The Iran situation dominates all other considerations. Key variables include: duration and intensity of the conflict, success in reopening the Strait of Hormuz to commercial shipping, oil price trajectory and sustained levels, economic data showing real-time impact on growth and employment, Fed response to stagflationary pressures, and whether Iran's response escalates or regional allies join the conflict.

Nearly 40% of the S&P 500 remains concentrated in megacap technology, which has shown relative resilience. However, if economic deterioration continues, even quality growth stocks may face pressure.

We emphasize maintaining portfolio diversification, avoiding panic-driven decisions, and ensuring adequate liquidity for potential opportunities. Periods of geopolitical crisis create volatility but have historically proven temporary from a long-term investment perspective. However, this oil price shock represents a material risk requiring careful monitoring and potentially tactical portfolio adjustments.

Please reach out to discuss your portfolio positioning and any concerns about energy price impacts.

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Important Disclosures

 Disclosures This material is for informational purposes only and is not investment advice or a recommendation to buy or sell any security. Past performance is not indicative of future results. Investing involves risk, including loss of principal. Asset allocation and diversification do not ensure a profit or protect against loss. Please review your specific circumstances with us before making any changes to your portfolio.