Spring 2026 Market Update
Recent developments in the Middle East have introduced a new layer of uncertainty into global markets. While geopolitical events can feel unsettling, especially when headlines intensify, it’s important to separate what is emotionally significant from what is financially impactful over time.
Markets are already beginning to reflect some of these developments, most notably through movements in oil prices, interest rate expectations, and short-term shifts in asset prices.
Oil Prices
As you know from filling up your gas tank, one of the most immediate effects of political conflict in the Middle East is rising oil prices. Roughly 20% of global oil supply typically passes through the Strait of Hormuz, which is why tensions in the region can quickly impact prices. While shipping activity has been disrupted, markets are reacting primarily to the risk of supply constraints rather than a sustained loss of supply. You can see from the chart below how shipping has been disrupted through the strait.
This has pushed the price of oil up 64% since the beginning of the year.
Because oil is a key input across the global economy, rising oil prices can have a ripple effect – impacting transportation costs, production expenses, and ultimately consumer prices. Historically, these types of spikes tend to stabilize as more information becomes available and supply chains adjust.
Interest Rates and Inflation
Front page economic news for the last few years has centered around the Federal Reserve Bank and their decision to cut, hold, or raise interest rates. Their mission is to balance inflation and employment. The spike we have seen in oil prices will likely lead to slower interest rate cuts as we expect to see inflation tick up in government data. The Fed would like to see the Personal Consumption Expenditures Price Index (PCE) around 2%. The most recent data from January shows the index at 2.8% meaning inflation was still a little too high even before the spike in oil prices.
We’ve already seen some of this reflected in markets, with the 10-year US Government bond rate increasing from 4.18% to 4.39%. This move in rates has caused bond returns to be slightly negative (-0.22%) so far this year.
Stocks and Asset Prices
Given the uncertainty, we have seen stocks slide, although price movement has been relatively contained so far. The S&P 500 is down roughly 5%, the Nasdaq is down 7.5%, and the broad international stock market index is actually up around 2%. Value stocks, which include defense, utility, and energy companies are positive across small (+4.59%), medium (+2.77%), and large companies (+1.10%) and have provided nice diversification for portfolios.
Gold, which had an incredible run in 2025 and is still positive in 2026, has been more volatile recently as investors balance safe-haven demand with the need for liquidity.
What This Means for Portfolios
Events like these often feel like they should lead to major investment changes – but history suggests otherwise. Markets have consistently navigated wars, conflicts, and global disruptions. While these events can cause uneasiness, they rarely alter the long-term trajectory of broadly diversified portfolios. In fact, reacting to geopolitical headlines tends to introduce more risk than it removes. By the time events are clear, markets have often already adjusted.
Our Perspective
Rather than trying to predict how events will unfold, we look to market indicators to understand how investors are interpreting the situation.
1 - Credit spreads. A high yield credit spread can be thought of as the amount a low credit score borrower has to pay in addition to the market interest rate for a loan. In times of financial stress, we usually see these amounts spike, as the probability of default increases. So far, we haven’t seen a substantial change, indicating these events haven’t caused systemic economic risk. You can see below what credit spreads looked like during COVID (massive move up), when recession fears were high in 2022, and last year during the tariff concerns. Right now, things have barely moved.
2 - Oil Futures. A futures contract is an agreement to trade a good for a specified price at some point in the future. If we look at the oil market, we see that prices are high now, but by October the market is expecting oil to be under $80/barrel. We interpret that to mean the disruption from the war is likely to be short-term as supply chains adapt or the war is resolved.
We will be monitoring these indicators closely and as things progress, we will look for opportunities. Solid financial plans are built to withstand disruptions and temporary declines in asset prices. Uncertainty is always present in markets – it simply takes different forms over time. Staying disciplined through these periods is what ultimately drives successful outcomes.