March 9, 2026

“If you can keep your head when all about you are losing theirs… Yours is the Earth and everything that’s in it.”

Rudyard Kipling

The Iranian regime was not the only ones taking a beating last week it was most investors, more on that in a minute. But first here are the numbers, The S& P 500 lost 1.24%, the Dow Jones Industrial Average surrendered 2.65%, the Nasdaq actually finished up .29%, Internationally, the FTSE 100 crushed down 5.74% and the MSCI-EAFE was no surprise off 3.88%. The 2-Year Treasury paid 3.556% and the 10-Year Yield was back over 4% paying 4.138%.

Unless you were under a rock the events of last week were stunning. The US and Israel apparently had enough of the Iranian regime delay tactics. The usual response from both sides was not unexpected, so was the market reaction due to the involvement in 20% of the world’s oil supply and their customers’ vital interest.

As Market Watch reported, President Trump calling for an ‘unconditional surrender’ by Iran didn’t help oil markets Friday U.S. and global benchmark prices on Friday tallied their largest weekly gains on record. Another week like that would lift prices very close to their all-time highs and invite talk of an economic doomsday. The price of oil can have far-reaching effects on the global economy from gasoline, jet fuel, utility and manufacturing costs, to inflation, consumer spending and employment.

Higher prices can increase inflation, negatively impact consumers’ purchasing power and slow economic growth, said Katy Kaminski, chief research strategist and portfolio manager at investment adviser AlphaSimplex. Higher inflation can, in turn, complicate monetary policy, she noted, which can then directly influence things like economic growth and employment.

Just how long any disruptions to the flow or production of oil in the Middle East last matters too, when it comes to the effects on the energy sector and the global economy. A couple of weeks may not be too damaging. But if we are talking about more than just a few weeks say, months at these higher levels, then this should “hit the global economy quite badly and lead to another inflation spike. The counter point? President Trump has demonstrated he will take bold action but will always have considered the results and does not seem to get into things he can’t win or control, (Typical businessman’s approach). Second, the fact that the existing regime which is on life support now is trying to make a deal to survive. It remains to be seen in the Iranian people take the opportunity, odds are they will and all this will quickly go away. Third, the overwhelming military power brought to bear suggests that it is a matter of time, despite the opposition spin of “Forever Wars”. The bottom line is the response in the financial markets is an overreaction and will soon correct itself, the question is how soon. That timetable will be determined by the results of this overwhelming attack and decapitation of the entire regime, and Iranian people.

The biggest hit came in Global market, which has traded sideways over the past couple of days despite the removal of top leadership from a rogue state. From a military perspective, one could not have asked for a more perfect execution of plans. However, there is obviously far more at hand here and the markets continue to reflect that unease. For sophisticated institutional investors and risk managers, this installment aims to address the source of that unease and possible outcomes. Meanwhile, intense Israeli strikes continued pounding Tehran and Beirut overnight, while Iran has attacked neighboring Gulf nations with missiles and drones.

Now on to the details. Markets turned cautious into the close last Friday as higher energy prices tightened conditions and dulled risk appetite. The central tension is between energy shock and inflation control, with crude strength colliding with hopes that easing can come without reigniting price pressure. The macro driver was geopolitics, (no kidding) as renewed Middle East escalation lifted oil and revived stagflation worries. The “so what” is a leadership shift toward energy and other cash-flow defensives, while transports and rate-sensitive growth face a tougher setup as input costs rise and duration gets repriced.

In other economic news, the February payrolls report from the U.S. Bureau of Labor Statistics showed a surprise loss of 92,000 jobs during the month. Economists had expected a gain of 60,000 jobs. The unemployment rate ticked up to 4.4%, from 4.3%. Creating arguments for further rate cuts by the Federal Reserve. As Jeffrey Bartash of MarketWatch reports, Wall Street economists agree the February jobs report was a bad one, but they are not sure it really reflects the true state of the labor market. The first two jobs’ reports of the year were like Jekyll and Hyde — January was good-looking and February was very ugly. Is it time to panic about the labor market? No, chief U.S. economist Stephen Stanley of Santander Capital Markets wrote in a research note. “The preponderance of evidence points to at worst a stable labor market and arguably some improvement in recent months,” he said. “The individual monthly readings during the winter months are always subject to volatility.”

It’s no surprise that global stocks swooned this week after hostilities started in the Middle East, but it’s probably more surprising that other assets also moved lower. For example, both gold and silver prices traded to the downside (silver was down roughly -10%). For all the talk about the U.S. dollar losing its place in the world, investors sold foreign currencies to buy dollars all week. But bond prices didn’t benefit – as a matter of fact, long-term yields increased pretty meaningfully,(10 Year Treasury back over 4%) on the perceived inflation risks from $90 WTI. Copper, uranium, and solar stocks were all down. The rally in Bitcoin is a bit of a headscratcher and reconfirms that crypto prices move to the beat of their own drum.

In the housing market last week, mortgage rates showed a slight uptick after recently dipping to multi-year lows, while the housing market continued to benefit from improved affordability and gradual inventory gains. Demand picked up notably: Weekly mortgage applications surged 11% in the prior period (reported around March 4), with refinance activity rising and purchase applications ahead of last year’s pace driven by those lower rates. Inventory continues to improve gradually, with more homes available and some softening in prices (e.g., more sellers reducing asking prices as homes sit longer in certain markets). The broader context includes a shift where more homeowners now have rates above 6% than below 3% (per Redfin data from late 2025), reducing “lock-in” effects and potentially encouraging more listings. In summary, last week saw a minor rebound in mortgage rates after hitting recent lows, but they stayed attractive enough to spur demand and support a slowly thawing housing market with better conditions for buyers than in prior years. Geopolitical events added some volatility, but the overall direction remains positive for affordability. For the most current rates or local details, check sources like Freddie Mac or a lender directly.

So, going forward? Recent sector performance data highlights a strong outperformance in areas tied to energy prices, infrastructure, materials demand, and defensive stability. Why? energy is leading the pack with YTD gains around 23-25% (driven by higher oil prices and sector momentum). Basic materials (including mining/metals) up significantly, often in the 14-17% range, benefiting from commodity strength and real asset plays. Industrials, strong performer at 10-14% YTD (and sometimes higher in sub-periods), fueled by infrastructure spending, manufacturing rebound, and AI-related buildout (e.g., data centers and power needs).

Consumer Defensive/Staples, posted solid gains around 9-15%, acting as a defensive haven amid rotation and economic uncertainty. In a word, hard assets and value stocks. In contrast, technology has lagged, down 3-6% YTD in many reports (a reversal from its 2025 dominance). Other growth-heavy areas like Communication Services and Consumer Cyclical are also underperforming or flat/negative. This rotation reflects investors seeking value, stability, and exposure to tangible economic drivers (e.g., energy prices, industrial activity, and essentials) rather than pure AI speculation. No surprise that Charles Schwab (as of early February) rate Industrials, Communication Services, and Health Care as “Outperform” relative to the S&P 500 over the next 6-12 months, citing solid fundamentals and some AI benefits spilling into industrials (e.g., power/infrastructure demand). Broader commentary points to continued momentum in “real assets” and cyclicals like energy, materials, and industrials, especially if economic growth holds and interest rates stabilize. Some sources note potential in utilities for AI power needs, though it’s mixed in recent performance.

Keep your eye on Middle East developments and the much wider implications, we hope these scenarios have been well discussed and contingencies planned for by the administration. The unknown is how long it will take.

Mike