March 23, 2026
Oil and rates drove the market setup. U.S. equities sold off as Middle East tensions pushed energy prices higher, with the Dow falling more than 10% from its February peak and entering correction territory. The S&P 500 and Nasdaq posted their fifth straight weekly losses, while mega-cap technology and consumer discretionary names came under pressure.
The concern was inflation. Brent moved above $110 per barrel in parts of the market, and investors stopped pricing Federal Reserve cuts for the year while assigning more probability to a rate hike. The 30-year Treasury yield nearly touched 4.98%, even though fourth-quarter GDP growth was only 0.7%. That combination pointed to stagflation risk rather than a normal slowdown.
The Strait of Hormuz was the key pressure point. Before the conflict, about 20% of the world's seaborne oil supply moved through the waterway. Brent crude for May gained more than 4% to $104.49, while WTI for May ended at $92.35. Conditional access to shipping lanes kept a risk premium in prices.
Supply-chain pressure also hit aluminum. The Gulf region supplies about 10% of global refined aluminum products, including 14% of Europe's import needs and 25% of Japan's. Regional premiums in the U.S., Europe, and Japan rose 30% to 40%, and qualifying alternative suppliers for specialty auto products could take 18 months.
India showed the emerging-market impact. The rupee fell to a record low of 93.94 per dollar and was down nearly 3% since the war began. Foreign investors pulled $9.5 billion from Indian equities, while Bank of America revised its rupee forecast to 94 per dollar by June.
M&A stayed active where buyers had a clear rationale. Merck agreed to buy Terns Pharmaceuticals for $6.7 billion, paying $53 per share, to add a leukemia treatment candidate as Keytruda faces future pressure. Keytruda generated more than $31 billion in 2025 and represented about half of Merck revenue. Apollo also agreed to buy Nippon Sheet Glass in a $3.7 billion turnaround deal, while Blackstone paid $1.8 billion for Royal Challengers Bengaluru.