NEW YORK (AP) — Stock markets struggled during the opening months of the year, but everything changed when warfare erupted.
Brent crude oil has climbed beyond $100 per barrel for the first time since summer 2022, while gas prices have skyrocketed. This marks a sharp departure from an extended stretch when oil costs remained mostly within the $60 to $70 range.
At the start of 2026, global markets were primarily focused on artificial intelligence concerns — questions about corporate overspending on AI technology and which businesses might become outdated. Today, investor focus has shifted entirely to the duration of Iran’s conflict, potential inflation spikes, and economic consequences. Major market indices like the S&P 500 have experienced wild daily fluctuations.
The conflict’s unpredictability creates challenges for Federal Reserve interest rate policy. The Fed maintained steady rates this year following three reductions in late 2025. Lower rates would boost economic activity but might fuel inflation, while higher rates could control price increases at the cost of economic expansion.
Market volatility surged throughout March as the Iran conflict unfolded:
Energy prices have driven dramatic U.S. stock market movements since hostilities began. Brent crude, representing roughly three-quarters of global oil benchmarks, has jumped from approximately $70 per barrel to peaks of $119. Market sentiment has oscillated between optimism for swift conflict resolution and fears that extended fighting will disrupt Persian Gulf energy supplies, potentially triggering severe inflation.
By late February, motorists across much of America were paying less than $3 per gallon. By Tuesday, national averages exceeded $4 for the first time since 2022.
Diesel fuel increases have been even more dramatic, with current averages reaching $5.45 per gallon compared to roughly $3.76 before fighting started, according to AAA data.
“Americans (are) spending hundreds of millions of dollars more on gasoline every day,” said Patrick De Haan, the head of petroleum analysis at fuel-tracking service GasBuddy.
American stock markets entered 2026 following three consecutive years of solid performance. Many overseas markets had outperformed U.S. exchanges in 2025 after lagging for several years.
The S&P 500 dropped nearly 4.6%, marking its poorest quarterly showing since 2022. The technology-heavy Nasdaq composite closed Thursday down more than 10% from its October record high, a decline steep enough for Wall Street professionals to label it a “correction.”
Energy companies have emerged among the S&P 500’s top performers for both the month and quarter. Exxon Mobil recorded its biggest quarterly increase, according to FactSet data. Occidental Petroleum and Valero Energy also posted strong results.
The month concluded with another significant market swing upward on renewed speculation that hostilities might end sooner than anticipated. However, similar optimism has emerged and disappeared multiple times during the conflict.
Investors usually turn to bonds and similar safe investments when global events threaten economic stability. However, inflation concerns from rising energy costs have triggered bond sell-offs and corresponding yield increases.
The 10-year Treasury yield stood at just 3.97% in late February but expanded to 4.44% before retreating slightly. This increase has elevated mortgage rates and other borrowing costs for American consumers and businesses. Market traders now see minimal probability of Federal Reserve rate cuts this year.
Future developments remain difficult to forecast. President Donald Trump has alternated between discussing conflict resolution and threatening to escalate by targeting Iran’s energy infrastructure. Iranian officials have dismissed Trump’s claims regarding diplomatic progress.
Iran continues controlling the Strait of Hormuz, the Persian Gulf waterway through which one-fifth of global oil moves during peaceful periods. Analysts expect continued heightened volatility in energy and stock markets as long as this situation persists.
