Monthly Market Report – March 2026
Market attention was completely dominated by developments surrounding the conflict in Iran. The United States and Israel launched a joint military attack on Iranian territory, which led to retaliatory actions by the Tehran regime, mainly targeting neighboring countries.
The price of oil rose sharply and continuously. The Brent benchmark ended the month trading at USD 118.35 per barrel, representing a +63.29% increase during the month and almost doubling the USD 60.85 level at which the year began. It is necessary to go back to mid-2022 to find similar levels in oil prices.
Although Iran accounts for only 5% of global crude oil production, its geographical position is key to understanding the rise in commodity prices. Iran is located on the northern shore of the Strait of Hormuz, through which 20% of all oil consumed worldwide passes every day. With a width of less than 33 km at its narrowest point, Iran has the ability to disrupt or even halt maritime tanker traffic. The strait is effectively closed, as insurers do not cover wartime events such as the current situation and Iran has attacked several vessels in the area.
The market fears that a prolonged conflict could lead to higher inflation and consequently to higher interest rates. It is estimated that for every USD 10 increase in the price of a barrel of crude oil, headline inflation could be affected by +0.20%. However, oil price increases need to remain in place for 2 or 3 months for the effects on inflation to become lasting.
Both equities and bonds experienced declines, with the impact being proportionally greater in the case of debt markets. Yield curves shifted sharply higher, especially at the short end. The German 2-year yield ended March at 2.61%, well above the 1.99% level where the previous month ended. At the beginning of the year, markets were pricing in a fully stable ECB; following recent developments, expectations have shifted to as many as 3 rate hikes in 2026. If confirmed, the benchmark rate for the eurozone would rise from the current 2.0% to 2.75% by year-end.
In the United States, market consensus had expected 2 rate cuts in 2026. The conflict in Iran has eliminated those expectations, and no moves by the Fed are currently expected this year. The U.S. yield curve experienced more parallel yield increases compared with its European counterpart. The U.S. 10-year Treasury yield ended the first quarter at 4.32%, above the 4.17% level at the start of the year and well above the 3.94% level reached at the end of February.
The main global equity markets experienced significant declines. During the first half of the month, Wall Street showed remarkable resilience and was barely affected; however, during the second half of March, concerns over a prolonged conflict accelerated the sell-off. As a result, the S&P 500 declined -5.09% during the month, bringing its 2026 year-to-date return to -4.63%. Meanwhile, the Euro Stoxx 50 fell -9.26% in March, bringing its first-quarter accumulated return to -3.83%.
The change in expectations regarding Fed monetary policy, together with the increase in crude oil prices, supported gains for the U.S. currency. The EUR/USD exchange rate traded below 1.15 EUR/USD. The U.S. dollar rose +2.24% in March and ended the quarter with an accumulated return of +1.67% against the euro.
Although uncertainty regarding the duration of the conflict remains the main source of volatility, the U.S. elections scheduled for November this year should encourage a rapid resolution. Trump’s approval ratings are low; gasoline prices in the United States have risen sharply, and American citizens do not support sending troops to the region. Markets currently expect that Trump would lose control of both Congress and the Senate, which appears to be forcing him to take urgent action. Additionally, the Fed ruling out rate cuts and equity markets remaining in negative territory do not point to a favorable electoral outcome for Republicans.
In this context, Trump attempted to reverse the situation on March 23 by announcing that negotiations with Iran had begun and were progressing positively. A temporary ceasefire was established and later extended until April 6, coinciding with the arrival of additional U.S. troops in the region. On the final trading day of March, Trump acknowledged that military objectives had been practically achieved and that he did not rule out withdrawing troops in the coming weeks, regardless of whether an agreement with Iran is reached.
Other important events in March included the meetings of the Fed and the ECB, in which both institutions kept interest rates unchanged. However, the European institution raised its inflation expectations for 2026 and acknowledged that it could not rule out rate hikes if the current oil market situation persists.
The U.S. macroeconomic data surprised negatively on two fronts. GDP growth was revised lower again, falling to +0.7% from +1.4%, reflecting a greater impact from the government shutdown that occurred during the final quarter of the previous year. Secondly, official employment data showed a loss of -92,000 jobs, compared with the +55,000 jobs expected. Although both figures affected markets, their impact was limited.