Macro Overview / March 2026

The most significant effects of the Middle East conflict imposed on the U.S. financial markets have been heightened inflationary fears, brought upon by elevated oil and gasoline prices, and rising Treasury yields. International markets have been more affected by the conflict in the Middle East than have U.S. markets. As the world’s largest oil and natural gas producer, the United States has emerged as the world’s leading energy provider, whereas other countries have become increasingly reliant on U.S. oil and natural gas. This reliance has created a buffer of sorts for the U.S., tempering the effects on the U.S. economy and financial markets from global events and conflicts. Oil is at the center of concern surrounding the Iranian conflict, with over 20% of global oil shipments passing through the Strait of Hormuz. Iran has pledged to destroy any ship attempting to navigate through the straight, igniting fears that oil tankers may be held captive and immobilized. The attack on Iran has reverberated across the Middle East, affecting numerous countries with the threat of infrastructure and economic damage. Any escalation of the conflict could further jeopardize energy markets and travel in the region. China’s involvement with the conflict has been limited, but expected to escalate since over 90% of Iran’s oil exports are sold to China, representing nearly 15% of China’s oil imports. China has been circumventing U.S. sanctions imposed in 2018 by buying oil from Iran, essentially illegally. Fed rate cuts are in question as the Fed grapples with the onslaught of new inflationary tensions and feeble employment. Prospects of a Fed rate cut diminish as inflation threats rise, hindering its ability to buffer a weakening jobs environment with lower interest rates. A federal trade-court judge ruled that the U.S. government will be required to start refunding the more than $130 billion it has collected with last year’s imposed global tariffs, which were invalidated by the Supreme Court in January. Over 1,800 U.S. corporations are seeking reimbursements from the U.S. government for tariffs paid thus far. Rising oil prices along with the federal court ruling ordering the government to pay back tariffs have dealt a setback to Treasury bonds, with rising yields and falling prices. Elevated Treasury yields translate into higher borrowing costs for consumers, which may hinder economic expansion. The Labor Department reported that the U.S. lost 92,000 jobs in February, surprising economists and analysts that were expecting job gains, not losses. The unemployment rate edged slightly higher to 4.4%, albeit still low relative to the pre-pandemic high of 10% in October 2009. The most recent data exposes continuous weakness in a labor market that has exhibited minimal hiring growth in the past few months. Growing inflation concerns along with a faltering jobs market present the emergence of stagflation, rising prices simultaneously with slowing economic growth. Weak employment expansion and a rising unemployment rate can lead to stagnant economic growth, due to lessened consumer expenditures which is the key to a healthy economy.

Sources: Labor Dept, Fed, U.S. Treasury, Dept. of Commerce