Weekly Economic Update: March 24th, 2026
Markets struggle as “war premium” weighs on investors
Wall Street started last week on a cautiously optimistic note. The S&P 500® climbed 1% on Monday — its best single-day gain since the conflict began — as crude oil prices briefly retreated toward $93 per barrel.1,2 But those gains were completely erased by Friday, as the S&P 500® and Nasdaq both closed at their lowest levels of the year.3
The pattern has become familiar: Markets rally on any sign of progress, then pull back sharply when the threat to global oil supply re-emerges. Much of the volatility is centered around the Strait of Hormuz, the critical waterway that sees 20 million barrels of oil pass through daily.4
The ongoing U.S.-Israel material campaign known as “Operation Epic Fury” has significantly degraded Iran’s conventional military capabilities, but Iran’s use of drone strikes and explosive-laden watercraft against oil tankers has kept the strait in a state of disruption. As long as that threat persists, a substantial “war premium” remains baked into energy prices and threatens to impact every corner of the market.
What started as an abstract geopolitical story for American consumers has turned into something more concrete. National average gas prices have jumped roughly 30% since the conflict escalated in late February.5 And the Trump administration’s temporary waiver of the Jones Act, a law governing domestic shipping, signaled real concern about fuel supplies.6
The broader concern among investors is duration. Iran’s apparent strategy of absorbing military strikes while continuing to disrupt energy flows is exactly the kind of prolonged standoff markets dislike most. With no clear timeline for resolution, investors have largely set aside traditional economic data and are trading primarily on headlines out of the Persian Gulf. As a result, the S&P 500® is down nearly 5% for the year, the Nasdaq has declined by 6.86% and the Dow Jones has declined by more than 5%.7
The Fed holds steady, to no one’s surprise
The Federal Reserve held its scheduled policy meeting last week and voted to keep the federal funds rate unchanged in the 3.5% to 3.75% range.8 The decision was widely expected, but the language accompanying it was notable. For the first time, the Fed’s official statement acknowledged uncertainty stemming directly from the Middle East conflict — a signal that policymakers are navigating genuinely murky conditions.
Fed Chair Jerome Powell described the domestic economy as expanding at a solid pace, but he made clear that the oil-driven inflation spike complicates the outlook. The Fed revised its year-end inflation projection upward to 2.7%, compared to the 2.4% it forecasted in December.9 That revision effectively pushes rate cuts further into the future, which is disappointing to those who had hoped the Fed might begin easing policy this summer.
The Fed appears wary of repeating the inflation mistakes of the 1970s, when oil shocks and loose monetary policy combined to produce years of economic pain.10 For now, the Fed’s posture is one of “wait and see” as they hope for more clarity before making any moves.
Adding another layer of uncertainty, Powell’s term expires in two months, and the Senate has yet to confirm President Donald Trump’s pick of Kevin Warsh as Powell’s successor.11 Trump has continued to publicly pressure the Fed for lower rates, and how that dynamic plays out in the weeks ahead is worth watching closely.
Coming this week
- What went into the Fed’s decision? We’ll find out this week, as several Fed officials make the speaking rounds.
- It’s a light week for data. We’ll start with construction spending on Monday, followed by U.S. productivity plus the Purchasing Managers’ Index (PMI) for services and manufacturing. A number above 50 indicates expansion in the coming months, and below 50 signals contraction. The last reading was at 51.6.12
- We’ll get a look at import prices on Wednesday, followed by weekly initial jobless claims on Thursday.
- Finally, Friday will feature consumer sentiment for the month of March.
Sources:
1 Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed March 22, 2026.
2 Business Insider. “Oil (WTI).” https://markets.businessinsider.com/commodities/oil-price?type=wti. Accessed March 22, 2026.
3 Yahoo! Finance. “NASDAQ Composite (ˆIXIC).” https://finance.yahoo.com/quote/%5EIXIC/. Accessed March 22, 2026.
4 Victor Ordonez. ABC News. March 20, 2026. “With the Strait of Hormuz effectively closed, alternative routes pose little help.” https://abcnews.com/International/strait-hormuz-effectively-closed-alternative-routes-pose/story?id=131221142. Accessed March 22, 2026.
5 AAA. “Fuel Prices.” https://gasprices.aaa.com/. Accessed March 22, 2026.
6 Wyatte Grantham-Philips. PBS News. March 18, 2026. “What to know about the Jones Act as the Trump administration unveils a 60-day waiver.” https://www.pbs.org/newshour/politics/what-to-know-about-the-jones-act-as-the-trump-administration-unveils-a-60-day-waiver. Accessed March 22, 2026.
7 Yahoo! Finance. “Dow Jones Industrial Average (ˆDJI).” https://finance.yahoo.com/quote/%5EDJI/. Accessed March 22, 2026.
8 Jeff Cox. CNBC. March 18, 2026. “Fed votes to hold rates steady, notes ‘uncertain’ impacts from Iran war.” https://www.cnbc.com/2026/03/18/fed-interest-rate-decision-march-2026.html. Accessed March 22, 2026.
9 Scripps News. March 18, 2026. “Federal Reserve holds interest rates steady, projects one cut this year.” https://www.scrippsnews.com/politics/economy/federal-reserve-holds-interest-rates-steady-projects-one-cut-this-year. Accessed March 22, 2026.
10 Michael Bryan. Federal Reserve History. “The Great Inflation: 1965-1982.” https://www.federalreservehistory.org/essays/great-inflation. Accessed March 22, 2026.
11 Dan Mangan and Emily Wilkins. CNBC. March 12, 2026. “Fed chair pick Kevin Warsh meets with more senators as Thom Tillis blockade continues.” https://www.cnbc.com/2026/03/12/fed-kevin-warsh-trump-thom-tillis-senate.html. Accessed March 22, 2026.
12 Investing.com. March 2, 2026. “U.S. Manufacturing Purchasing Managers Index (PMI).” https://www.investing.com/economic-calendar/united-states-manufacturing-purchasing-managers-index-(pmi)-829. Accessed March 22, 2026.
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