Spring 2026 
^{Volume 34 | No. 2}

Market QuickTakes Q1 | 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.

Key Q1 Highlights

• Stocks rallied strongly on the final day of March on news of a potential ceasefire agreement, trimming month-to-date losses. U.S. equities surged more than 2.5%, while developed international and emerging markets—reported a day later—gained 3.8% and 4.3%, respectively.
  
  
• U.S. stock benchmarks fell more than 5% across the board in March, while the tech-heavy Nasdaq modestly outperformed, declining 4.8%. Large-cap value significantly outperformed large-cap growth, returning +1.3% versus –8.4%, respectively (JPMorgan).
  
  
• Despite the March sell-off, small- and mid-cap stocks still closed the first quarter in positive territory. The Dow, S&P 500, and Nasdaq finished the quarter in negative territory, led by the Nasdaq down 7.1%. It marked the weakest quarter for U.S. large-cap stocks since 2022 (Schroders).
  
  
• International markets, which led global equities through the end of February and continued their 2025 outperformance, were hit harder in March than their U.S. counterparts given their greater dependence on imported energy. The MSCI EAFE Index fell into correction territory, declining 10.7% in March, while Emerging Markets dropped 13.3%, with both finishing down modestly -1.9% and -0.5% respectively for the quarter. 
  
  
• Disruption of oil supplies through the Strait of Hormuz caused energy prices to surge. Correspondingly, inflation expectations jumped and market expectations for Federal Reserve rate cuts by year-end fell to near zero.
  
  
• The Federal Reserve held interest rates steady at its March FOMC meeting, as widely expected.
  
  
• Market interest rates rose sharply during March as inflation expectations climbed. The benchmark 10-year Treasury yield increased 0.31% to 4.30%, while the Bloomberg U.S. Aggregate Bond Index declined 1.9%.
  
  

 
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 (4-10-26), 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%.

April Update Continued: 

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%.

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.