Rates Head Higher As Market Turmoil Erupts – Fixed Income Update

Interest rates rose in March propelled by rising oil and gasoline prices, hindering the Fed’s objective of eventually easing rates. Treasury yields rose across all maturities as markets expected the Fed to abandon its rate reduction expectations due to rising inflationary threats. Historically, funds flow into Treasuries during periods of conflict and war, yet the Middle East conflict has influenced Treasuries differently, with rising oil prices stoking inflation. Mortgage rates climbed to their highest levels since October, depressing application activity for new and refi-loans. The average rate for a 30-year conforming mortgage loan was 6.46% at the beginning of April, up from 5.98% at the beginning of March. Inflation and jobs data will determine what the next move will be by the Federal Reserve. (Sources: U.S. Treasury, FreddieMac, Federal Reserve)

Volatility Picks Up With Middle East Conflict – Equity Market Overview

Stocks wavered in March following the start of the Middle East conflict. Volatility rose significantly and abated day to day as details of the conflict and what was expected to transpire fueled speculation. Earnings have become a focal concern as elevated gasoline and diesel prices may eventually seep into corporate profitability. Consumer sentiment has also become an indicator as to where household expenditures might be allocated. All major equity indices reacted as the war erupted, with oil stocks leading while nearly every other sector faltered. Oil industry stocks tend to appreciate as the price of oil rises since their margins increase without any additional expenses. Markets have thus far tested valuations of technology and other growth sectors as the Middle East turmoil has exposed the risks of market fragility. The energy sector was the only positive performing sector in March, gaining 10% as oil related stocks drove prices higher within the sector. (Sources: S&P, Bloomberg, Reuters)

How A Supply Shock Raises Gasoline Prices – Energy Industry Overview

The sudden and unforeseen disruption in oil supply and transportation due to the ongoing conflict in the Middle East has caused oil prices to nearly double compared to their pre-conflict levels. This mirrors past events where supply shocks occurred, such as the 1973 OAPEC Embargo, the 1979 Iranian Revolution, the 1990 Gulf War, and now, the tensions in the Strait of Hormuz. These abrupt disruptions in the flow of oil can have severe consequences for countries reliant on imported energy, often destabilizing their economies.

Global economies depend on stable and predictable fuel supplies, enabling businesses and governments to plan for both current and future energy needs. A disruption in this supply chain leads to rising prices and may throw long-term planning off course. When oil transport halts, crude oil becomes unavailable for refining into gasoline, which reduces supply and pushes prices higher. Countries lacking refineries or oil reserves are typically the hardest hit by such shocks.

On the other hand, the United States, with its extensive network of refineries and oil reserves, is better positioned to weather the initial effects of a supply shock. This allows oil producers to gradually ramp up production to meet rising demand. However, history shows that gasoline prices tend to rise much faster than they fall. As a result, even if a ceasefire is reached, it is unlikely that prices will drop as quickly as they spiked. Gas station operators, whose profit margins shrink during rapid price hikes in wholesale oil, tend to reduce prices more slowly as they sell off the more expensive inventory they purchased earlier.

(Sources: International Energy Agency, U.S. Dept. of Energy)

The Challenge With Expanding Data Centers & Energy Usage – Utilities Sector Update 

The current number of data centers under construction will need the equivalent amount of electricity as the entire country of Italy. As of early 2026, there are over 4,000 operational data centers in the United States, with nearly 3,000 additional new facilities either planned or under construction.

Data centers consume an enormous amount of electricity, with eight of the regional power grids in the United States already at or below critical spare capacity levels. The Edison Electric Institute estimates that utility companies will spend $1.1 trillion between 2025 and 2029 on capital projects in order to expand electricity generation.

Data centers are becoming increasingly debated among politicians and local representatives, since these enormous structures employ just a small number of workers and produce little if any collateral benefits for local communities. Most concerning is the amount of power data centers divert from local homes and communities, having led to utility price increases and rate hikes among various states. Some states have been more approachable than others in working with utilities and their expansion projects in order to provide the electric demanded by data centers.

The majority of the billions of dollars that the large tech companies are spending on AI infrastructure build-out is going towards actual semiconductors, hardware and buildings, with a fraction being spent on electricity. What is driving the growth estimates for utility companies are the numerous decade plus contracts being signed with these tech companies, ensuring years of revenue growth.

Texas leads data center development and construction, providing large land areas, rapid permitting, and a deregulated electric grid that allows developers to access power easily.

Sources: Dept. of Energy, Edison Electric Institute, EPA