At PalomarWealth, it is important to us that you are well informed about what’s happening in the markets. Here are a few of the key topics of conversation that we feel deserve the most attention this month. If you have any questions or would like to continue the conversation, let us know, and we appreciate the opportunity.
The U.S.-Israeli military strikes on Iran that began February 28 sent shockwaves through global markets. The S&P 500 fell to its lowest level of 2026, closing at 6,632 on March 13 and posting its first three-week losing streak in roughly a year. Iran's effective closure of the Strait of Hormuz, through which roughly 20% of global oil supplies transit, pushed West Texas Intermediate crude past $98 per barrel and Brent crude above $100 for the first time since 2022. The CBOE Volatility Index (VIX) surged to 28.4 as institutional investors shifted into broad defensive positioning.
The conflict triggered a sharp sector rotation. Energy stocks climbed more than 2.5% in the week ended March 13 and were up over 10% on the year. Utilities also gained on defensive demand and rising electricity consumption tied to artificial intelligence data centers. Technology and communication services each fell more than 1% on March 13, extending a pattern from February when big-tech weakness dragged the Nasdaq down 3.4% for that month. Retail investors poured record amounts into oil-linked exchange-traded funds as capital moved away from growth sectors toward defensive names.
A troubling stretch of economic data compounded the geopolitical anxiety. The economy shed 92,000 jobs in February, far worse than the 50,000 gain economists expected1. The unemployment rate rose to 4.4% and average hourly earnings climbed 0.4% for the month, reinforcing concerns about sticky wages1. The Consumer Price Index (CPI) for February showed annual headline inflation at 2.4% and core CPI, which excludes food and energy, at 2.5%, figures that largely predated the oil shock2. In addition, fourth-quarter 2025 GDP growth was revised down to 0.7% annualized from the original 1.4% estimate, well below the 1.5% consensus3. Slowing growth, paired with surging energy costs, has revived stagflation fears not seen since 2022.
The bottom line: The Federal Reserve's March 17–18 meeting now looms as a critical inflection point, with policymakers weighing inflation risks from the oil shock against a weakening labor market. Futures markets have pulled forward expectations for the next rate cut to July4. The International Energy Agency's agreement to release 400 million barrels from member-country reserves may help stabilize prices in the near term, but the Strait of Hormuz remains effectively closed. With consumer sentiment fragile and earnings season approaching, the path forward depends on whether the conflict de-escalates before lasting economic damage takes hold.
Sources:
- Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm
- Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
- Bureau of Economic Analysis, https://www.bea.gov/news/2026/gdp-second-estimate-4th-quarter-and-year-2025
- CME Fed Watch Tool, https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
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Definitions:
The S&P 500® Index, or the Standard & Poor's 500® Index, is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.
The Nasdaq-100 is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange. It is a modified capitalization-weighted index.
Nonfarm payrolls measure the total number of paid workers in the U.S., excluding farm employees, government employees, private household workers, and employees of nonprofit organizations.
The unemployment rate represents the number of unemployed people as a percentage of the labor force (the labor force is the sum of the employed and unemployed).
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.
The Bureau of Labor Statistics (BLS) is an agency of the United States Department of Labor. It is the principal fact-finding agency in the broad field of labor economics and statistics and serves as part of the U.S. Federal Statistical System. BLS collects, calculates, analyzes, and publishes data essential to the public, employers, researchers, and government organizations.
The Bureau of Economic Analysis (BEA) produces economic accounts statistics that enable government and business decision makers, researchers, and the American public to follow and understand the performance of the Nation's economy.
The VIX (Volatility Index) measures the market's expectation of 30-day forward-looking volatility in the S&P 500 stock market index, often called the "fear gauge". A high VIX indicates expected price swings and market uncertainty, while a low VIX suggests stability. It is derived from the prices of options on the S&P 500 and is known to have an inverse relationship with the S&P 500, meaning it typically rises when the stock market falls.
Brent is the leading global price benchmark for Atlantic basin crude oils. It is used to set the price of two-thirds of the world's internationally traded crude oil supplies. It is one of the two main benchmark prices for purchases of oil worldwide, the other being West Texas Intermediate (WTI).
WTI crude oil, or West Texas Intermediate, is a specific grade of crude oil and a major benchmark for oil pricing, particularly in the North American market.
The University of Michigan's Consumer Sentiment Index is a monthly survey-based economic indicator that measures consumer confidence in the United States. It is compiled by the University of Michigan's Surveys of Consumers and reflects consumers' views on their current financial situation, economic expectations, and purchasing conditions.