Market Commentary - April 2026

April 2026

Markets Remain Resilient Amid Geopolitical Tensions and Energy Price Volatility

Despite record-setting marks for global equity benchmarks in January and February—marking a solid though mixed start to the year—markets quickly turned south in March as the U.S.–Israel war with Iran escalated. Soaring energy prices and uncertainty over broader regional conflict disrupted financial markets, pushed inflation expectations higher, and triggered a spike in volatility.

Global financial markets experienced a sharp shift in tone during March as escalating geopolitical tensions disrupted energy markets and fueled volatility across asset classes. While equities began the year on strong footing, rising conflict in the Middle East and the resulting surge in oil prices drove a broad market sell-off before a late-month rebound helped trim losses.

Stocks rallied strongly on the final trading day of March following news of a potential ceasefire agreement, which helped ease immediate market fears and reduce month-to-date losses. U.S. equities surged more than 2.5%, while developed international and emerging markets—reported a day later—rose 3.8% and 4.3%, respectively.

Despite the late recovery, U.S. stock benchmarks declined more than 5% across the board for the month. The technology-heavy Nasdaq modestly outperformed, falling 4.8%, while style performance diverged significantly. Large-cap value stocks posted gains of 1.3% during the month, dramatically outperforming large-cap growth stocks, which declined 8.4%, according to JPMorgan.

Even with the March sell-off, smaller company stocks demonstrated relative resilience. Small- and mid-cap equities still managed to close the first quarter in positive territory. In contrast, the Dow Jones Industrial Average, S&P 500, and Nasdaq all finished the quarter in the red, led by the Nasdaq’s 7.1% decline. According to Schroders, it marked the weakest quarterly performance for U.S. large-cap stocks since 2022.

International markets, which had led global equities through the end of February and extended their relative outperformance from 2025, were hit harder during March than their U.S. counterparts. Their greater reliance on imported energy left them particularly vulnerable to the surge in oil prices. The MSCI EAFE Index fell into correction territory, declining 10.7% during the month, while Emerging Markets dropped 13.3%, with both finishing down modestly -1.9% and -0.5% respectively for the quarter.

The primary catalyst behind the volatility was a sharp disruption to global energy markets. Supply concerns stemming from shipping disruptions through the Strait of Hormuz caused oil prices to surge dramatically. West Texas Intermediate crude rose 50.4%, while Brent crude climbed 70.9%, according to YCharts. The magnitude of the move echoed past geopolitical energy shocks, including the oil crises of the 1970s and the 1990 Gulf War.

The surge in energy prices quickly translated into higher inflation expectations, which in turn altered the outlook for monetary policy. Market expectations for Federal Reserve rate cuts by the end of the year fell sharply, dropping to near zero as investors reassessed the potential persistence of inflation.

At its March Federal Open Market Committee meeting, the Federal Reserve held interest rates steady, a decision that had been widely anticipated by markets. Policymakers noted that the U.S. economy continues to expand at a solid pace. While job growth has moderated in recent months, the unemployment rate has remained relatively stable at 4.4%. However, inflation remains above the Fed’s long-term target, prompting officials to remain cautious about easing monetary policy.

Rising inflation expectations also pushed market interest rates higher throughout March. The benchmark 10-year Treasury yield increased by 0.31 percentage points to 4.30%. As yields climbed, bond prices declined, with the Bloomberg U.S. Aggregate Bond Index falling 1.9% for the month.

Together, the combination of geopolitical uncertainty, surging energy prices, and shifting monetary policy expectations created one of the most volatile market environments of the year, underscoring how quickly global events can influence financial markets.

April Update

Markets remain gripped by daily developments surrounding the Iran war, including any progress toward a sustainable ceasefire and eventual resolution of the conflict. The March 31 rally has extended into April, though the ceasefire remains fragile amid continued disruption of oil supplies through the Strait of Hormuz.

U.S. and international equities have shown resilience thus far in April, continuing their rebound from late-March lows. The Nasdaq and large-cap growth stocks have led the advance, gaining 6.1%, followed by the small-cap Russell 2000 up 5.4%, while the benchmark S&P 500 has risen 4.4%.

Small- and mid-cap stocks have recovered into positive territory year-to-date, while the Dow, S&P 500, and Nasdaq remain modestly lower for the year.

More energy-sensitive international markets, which fell into correction territory during the March sell-off, have staged the strongest rebound and are now back in positive territory year-to-date. The MSCI EAFE Index has rallied 7.3%, while the MSCI Emerging Markets Index has surged 10.8%.

Recession risk entering 2026 was slightly above normal at roughly 20%. That risk has since increased to approximately 30–40%. For context, the long-term probability of recession at any given time is about 15%. While risks have risen, recession is not currently the baseline forecast.

Market and consumer sentiment fell sharply during March, and the longer the Iran war persists, the greater the potential for rising recession risk and higher inflation expectations.

Meanwhile, first-quarter corporate earnings estimates remain strong at 12.6%, according to FactSet, helping to support elevated market valuations. Revenue growth expectations also remain solid.

The Outlook

We continue to urge investors to maintain patience, discipline, and a long-term perspective amid the Iran war and broader Middle East conflict. The ceasefire remains fragile, risks are elevated, and volatility is likely to persist.

For perspective, it is important to remember that regional wars and military conflicts have historically been short-term events for financial markets. Markets typically digest the shock, consolidate, and eventually recover. At present, markets remain in that adjustment process as investors assess the potential short-, intermediate-, and long-term economic impacts.

At this juncture, we maintain our modestly positive outlook for 2026. Should conditions deteriorate further, we continue to recommend that investors remain resilient and stay the course.

Investor Takeaways
•    Remain well-diversified
•    Maintain discipline and patience
•    Keep focus on the long term
•    Review your risk tolerance

Call your Nelson Advisor today at 800-345-7593 to discuss your portfolio and any concerns.

~ Your Nelson Securities Team

Past Performance is No Guarantee for Future Results

This article is for informational purposes only and does not constitute investment advice.