Over the past few weeks, the conflict with Iran has influenced oil prices, inflation expectations, and the stock market’s flight to safety. While some developments may feel abrupt or concerning, markets are adjusting and responding, not unraveling. Here is a view of recent economic and market shifts, the U.S. stock market reaction to the Iranian strikes, and how investors can respond objectively.
Geopolitical Tensions and Oil Prices
In response to tensions with Iran, oil prices surged, briefly pushing beyond $100 per barrel, marking a roughly 69% increase from previous levels. Moves of this magnitude capture attention, but while prices can stay generally elevated, dramatic spikes don’t last.
Investors have navigated this before. A similar spike occurred in 2022 when inflationary pressures pushed oil to $120 per barrel before returning to regular levels.
Inflation Expectations
Rising oil prices have resurfaced inflation concerns, but inflation expectations matter more than current data. One key measure is the 5-year, 5-year forward inflation chart, which reflects the market’s estimate of the average inflation rate for the five-year period beginning five years from now.
Historically, this inflation expectation data is an accurate forward-looking indicator that the Federal Reserve watches; it can influence current market volatility.
As of mid-March 2026, the 5-year, 5-year forward inflation expectation sat around 2.3%, slightly above the Federal Reserve’s 2% target but well below the 3-3.5% range that raises concern. In other words, while inflation worries have re-emerged, the underlying data does not suggest a problem. In fact, despite its connotation, mild inflation is healthy.
The longer the conflict in Iran persists, the more helpful the 5-year, 5-year forward indicator becomes, and our Investment Management Team will keep it at the forefront of their analysis.
U.S. Stock Market Reaction to Iranian Strikes
Another notable development is the change in global market performance. In 2025, international equities rose roughly 30% amid a weakening U.S. dollar. This year, especially in the last 2-3 weeks of geopolitical conflict, U.S. equities have begun to outperform international markets.
This divergence reflects a classic “flight to safety” or “flight to quality.” During uncertainty, markets flow toward stability, and U.S. equities are the current destination of choice. One explanation is that international markets house more oil-dependent industrial companies than the United States, which is home to more technology companies. The trend could reverse, but it reinforces the U.S. as a flight-to-safety choice during global uncertainty.
The U.S. Dollar Rebounds
In tandem with the outperformance of U.S. equities, the U.S. dollar has strengthened meaningfully in recent weeks after declining through much of 2025. A rising dollar creates a headwind for international equities and signals money flowing back into U.S. markets.
Continued Market Broadening
Outside of geopolitical events, the average stock continues to outperform the S&P 500, a shift that started last October. The S&P 500 equal-weight index (which adjusts the normally top-heavy S&P 500 by weighing all stocks equally) is slightly positive year to date, while the Magnificent 7 (Microsoft, Nvidia, Apple, Amazon, Google, Broadcom, & Meta) have declined 10% overall, demonstrating the impact these seven AI-driven, tech-centric companies have on tipping the S&P 500 downward. Why is this happening?
After a prolonged period of exuberant performance, these mega-cap names are posting earnings with great – but not overly exciting – expectations. The stock market prices returns based on what is likely to happen over the next 6, 9, and 12 months. When expectations are good but not as good as they’ve been before, the market reacts to the downside. The result is a broadening market, with leadership expanding beyond a narrow group of stocks.
Positioning for What Comes Next
As we close March 2026, markets are navigating geopolitical uncertainty, inflation expectations, and shifting leadership across equities. While these forces can create short-term concerns, taking an objective stance reveals the more stable reality and opportunities.
At Credent, we’ve pivoted from the mega-cap names, but remain ready to capitalize on future opportunities, knowing the AI trend isn’t going away. As always, we take a data-driven, risk-managed approach to help clients navigate the current environment with hope and confidence.
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