Markets look for geopolitical clarity

With the end of March approaching, a still-murky geopolitical picture and elevated oil prices were weighing on financial markets as the Iran war extended to a fourth week.

Last Monday crude oil prices tumbled 10% and the S&P 500 (SPX) rallied more than 1% after the White House announced it would postpone attacks on Iranian energy facilities. But oil rebounded—and stocks sagged—the rest of week amid conflicting messages about US-Iran peace negotiations and warnings of future strikes.

The Nasdaq 100 (NDX) tech index, Nasdaq Composite (COMP), and Dow Jones Industrial Average (DJIA) joined the Russell 2000 (RUT) small-cap index in correction territory last week by closing at least 10% below a previous close. The SPX didn’t cross that threshold, but it still ended last week at fresh lows for the year—despite the White House’s late-Thursday announcement that it would extend the airstrike pause until April 6:

The headline: S&P 500 posts fifth-straight down week.

The fine print: Last week’s decline was in line with the SPX’s historical tendencies after four-week losing streaks, as well as after back-to-back weeks of lower SPX and Cboe Volatility Index (VIX) closes. The SPX also closed lower more often than higher one week after five-consecutive down weeks—15 out of 27 times since 1957.¹

The number(s): $80-$90, the likely price range Morgan Stanley & Co. strategists believe Brent (global) crude oil will trade in the remainder of the year. That forecast reflects a near-term de-escalation of hostilities in the Middle East that results in normal oil tanker traffic through the Strait of Hormuz.²

The scorecard: Tech and large caps took the biggest hits last week, while small- and mid-caps posted small gains:

Sector returns: The strongest S&P 500 sectors last week were energy (+6.1%), materials (+4.1%), and utilities (+2.7%). The weakest sectors were communication services (-7.1%), tech (-3.5%), and financials (-2.3%).

Stock moves: Kodiak Sciences (KOD) +75% to $39.76 on Thursday, Argan (AGX) +38% to $566.62 on Friday. Maze Therapeutics (MAZE) -35% to $31.73 on Wednesday, MillerKnoll (MLKN) -22% to $15.03 on Thursday.

Yields and the dollar: The 10-year US Treasury yield climbed 0.04% to 4.43% last week. The US Dollar Index (DXY) rallied 0.50 to 100.15.

Commodity futures: May WTI crude oil (CLK6) dropped 10% last Monday, but rebounded to end the week up $1.41 at $99.64. In another soft week for metals, June gold (GCM6) closed Friday at $4,524.30, down $85.30 for the week. Biggest gains: May orange juice (OJK6) +9.3%, May red wheat (KWK6) +4.4%. Biggest declines: July platinum (PLN6) -5.4%, May oats (ZOK6) -4.6%.

Crypto: Bitcoin ended the week down 3.5% at $66,319.70. Ethereum fell 4% to $1,992.69.

This week’s economic calendar revolves around labor-market data, but February’s shutdown-delayed retail sales data should get a fair amount of attention. The monthly jobs report will be released on Friday, even though markets will be closed for Good Friday:

●Tuesday: S&P Case-Shiller Home Price Index, FHFA House Price Index, Chicago PMI, Job Openings and Labor Turnover Survey (JOLTS), Consumer Confidence
●Wednesday: ADP Private Employment, Retail Sales (delayed, for February), S&P Global Manufacturing PMI, ISM Manufacturing Index, Business Inventories (delayed, for January)
●Thursday: job cuts, balance of trade
●Friday: Good Friday (US stock exchanges closed), Employment Report, S&P Global Services PMI, ISM Services Index

This week’s earnings include:

●Monday: Progress Software (PRGS), USA Rare Earth (USAR)
●Tuesday: FactSet (FDS), McCormick & Company (MKC), Nike (NKE), PVH (PVH), RH (RH), TD Synnex (SNX), Unifirst (UNF)
●Wednesday: Conagra (CAG), Cal-Maine Foods (CALM), Lamb Weston (LW), MSC Industrial Direct (MSM)
●Thursday: Acuity (AYI), nCino (NCNO)

Although one concrete positive development out of the Middle East could change things, barring a 7.5% rally over the next two days, the SPX will end the first quarter in negative territory for the year. If the quarter had ended on Friday, the 7% decline would have been the eighth-biggest Q1 loss of the past seven decades.³

First-quarter declines aren’t common, but they’re far from rare. The SPX has had a negative Q1 return 27 other times since 1957, ranging from -0.06% (2002) to -20% (2020)—most recently in 2025, when it closed the quarter down 4.6% but rallied 22% over the next nine months to end the year with a better-than-average 16.4% gain.

More often than not, though, negative Q1s have been part of weaker-than-average years for the SPX. After a negative Q1, the index posted a net gain for the remainder of the year (April-December) in 14 of 27 cases, but its full-year return was negative in 15 cases.

In years with positive Q1s, the SPX’s average April-December return was 8.8% and its average full-year return was 16.4%. But in years with negative Q1s, the average April-December return was 3.3% and the average full-year return was -3%.

This year’s x-factor, though, may be its geopolitical component. March’s pullback unfolded against the backdrop of an unexpected war with Iran and a 50% increase in crude oil prices. A clear resolution to the conflict—and one that occurs sooner rather than later—would arguably have the potential to clear the path to potential upside the remainder of the year.

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¹ All figures reflect S&P 500 (SPX) weekly closing prices, 1957-2026. Pattern refers to five-straight down weeks preceded by an up week. Supporting document available upon request.
² MorganStanley.com. Energy Shocks in the Economy & Markets II. 3/24/26.
³ All figures reflect S&P 500 (SPX) monthly closing prices, 1957-2026. Supporting document available upon request.