Oil prices surge to two-week winning streak as Iran supply fears grip markets
The war in Iran is increasingly weighing on global financial markets and economic activity. Reflecting the rising macro risk, the major U.S. equity benchmarks have slipped into negative territory for the year. But a closer look at stocks shows that most equity risk factors continue to enjoy positive returns in 2026, based on a set of ETFs through Monday’s close (Mar. 9).
Mid-cap growth (IJK) is leading the field, posting a 6.6% year-to-date gain. Although the fund has slipped in recent days, it traded up yesterday and is just 4.4% below the record high it set last week.
Most of the risk factors that make up the stock market are holding on to gains this year. The two exceptions: momentum (MTUM) and large-cap growth (IVW), which are mainly responsible for pulling the broad equity market indexes into the red this year. The SPDR S&P 500 ETF (NYSE:SPY), for instance, is down 0.5% in 2026 vs. a 2.8% loss for large-cap growth (IVW).
Although the war so far has had varied effects on different segments of the stock market, the threat to equities will likely rise the longer the conflict continues. Until a solution, diplomatic or otherwise, reopens the shuttered Strait of Hormuz — the transit point for roughly 20%-plus of the world’s oil and liquefied natural gas — a global energy crisis looms, which could in turn trigger a worldwide recession.
The divergence in performance this year highlights a market that is repricing broad macro risk while still rewarding more defensive or structurally resilient styles. The key question for the months ahead is whether the economic drag from higher energy prices, weaker confidence, and tighter financial conditions becomes strong enough to drag down all factor returns down as well. If the macro shock deepens, the current resilience in factor strategies may prove temporary.
There are positive signs emerging. Saudi Aramco, based in Saudi Arabia, says it expects to restore roughly 70% of its usual crude exports within days by rerouting up to 5 million barrels a day through its Red Sea port at Yanbu, allowing shipments to bypass the war‑disrupted Strait of Hormuz.
President Trump on Monday offered an optimistic view that the war is nearing an end. In response to a question about a timeline, he said “very soon.”
Perhaps, but an energy shock is already starting to reverberate across the global economy and the clock is ticking. For now, the effects are most acute in countries that are dependent on oil imports, including South Korea, Taiwan, Japan, India and China, along with much of Europe.
The US, by contrast, is the world’s largest oil producer and a net exporter, providing a degree of immunity from the supply shock. But oil is priced globally, and so the surge in energy prices recognizes no national border.
The energy shock also has implications beyond oil and gas. Joseph Glauber of the International Food Policy Research Institute estimates that up to 30% of global fertilizer exports move through the Strait of Hormuz, and the current disruption is already cutting shipments, raising farm costs, and likely pushing food prices higher.
The key macro risks: higher inflation and slower growth – threats that will strengthen the longer the war disrupts energy markets. The IMF’s managing director, Kristalina Georgieva, estimates that a sustained 10% rise in energy prices would add about 40 basis points to global inflation and trim global growth by 0.1–0.2%.
“This is a very concerning shock to consumers, which have been a driving force in the economy,” said Tim Mahedy, chief economist at Access/Macro, a research firm, formerly at the Federal Reserve Bank of San Francisco. “I am very concerned this could tip us into a recession if it persists.”
Traders at the betting site Polymarket are still downplaying the odds of a US economic downturn this year. The current estimate this morning – 28% – reflects a jump since the war started, but optimism is still intact that growth will prevail.
The crucial variable, of course, is the timeline for the war, and the potential for ongoing repercussions after the fighting stops. Estimating the risk outlook, in short, will remain a day-to-day affair for the foreseeable future.