Impact of War on April 2026 Markets
The rapidly evolving conflict in Iran has had major short-term ramifications on commodity prices, expectations for inflation and Federal Reserve action, and the stock market in recent weeks. Crude oil prices have spiked with the shutdown of the Strait of Hormuz. While the US is now a net exporter of oil, a supply shock has spiked prices dramatically (up over 40% on Brent and WTI crude). Ultimately higher energy prices impact consumer spending decisions, trickle into inflation, and could mean slower economic growth for 2026.
Market expectations for Fed rate cuts have now moved down from two to one later in 2026 as inflation will rise with increased energy costs. Keep in mind these expectations can shift again on a dime should the conflict in Iran have a path toward a resolution. The prospect of higher energy costs and increased inflation resulted in yields coming up in recent weeks. Until a resolution is reached, a “higher for longer” sentiment for inflation and rates will persist which will keep investors in a risk-off mindset.
Mission’s portfolios are positioned with risk management at the forefront for these types of shocks. History tells us we should expect more volatility ahead. We all recognize the horrible human impact of war. The markets, however, will look ahead to resolution and eventual recovery.
Context on how markets have performed during past geopolitical shocks can inform us as investors of what to expect this time. The table above highlights that after most initial geopolitical shocks, returns are positive with 2022 and 2001 notable exceptions.
Please reach out directly to Mission’s Portfolio Team to discuss your accounts and our strategy during this time.
Source: First Trust, Ken French Data Library. Ken French data library uses the CRSP database. Past performance is no guarantee of future results. *Since the market was closed on 10/7/2023, 10/6/2023 was used for the event date returns. Universe includes all New York Stock Exchange (NYSE), American Stock Exchange (AMEX) & NASDAQ stocks. Returns are market-cap weighted. An investor cannot invest directly in an index. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Mission’s market and investment commentaries reflect the analysis, interpretation, and economic views and opinions of our investment team. They are not intended to provide investment advice for any individual situation. Please contact us if we can provide insight and advice for your specific needs.
