Markets moved lower for a fourth straight week, as rising geopolitical tensions and shifting interest rate expectations weighed on sentiment. The S&P 500 fell about 1.9%, with similar declines in the Nasdaq and Dow.

The primary driver continues to be the escalating conflict involving Iran, which has created significant uncertainty around global energy supply. While oil prices were volatile, the bigger impact has been on inflation expectations and investor confidence. At the same time, last week saw sharp declines in commodities like gold and silver, signaling broader volatility across markets.

The Strait of Hormuz has effectively been closed due to threats of attacks by Iran. But it isn’t just oil that travels through that choke point. As Scientific American details, a third of all commercial helium comes from Qatar which has now unable to make it to the global markets. While we often think of helium with party balloons, the element is used as a coolant in the manufacturing of microchips. As we learned during the covid pandemic, there can be secondary and tertiary implications beyond the primary headlines about oil when a black swan event like the conflict in the middle east take place.

Stateside, the Federal Reserve reinforced a more cautious stance midweek during their March FOMC Meeting. While rates were left unchanged, the Fed raised its inflation outlook and acknowledged that rate hikes were at least discussed. That pushed rate cut expectations further out, raised  the possibility of rate increases at some point in the near future, and sent Treasury yields higher. This combined with other world event headlines put pressure on stocks, especially rate-sensitive areas like technology, real estate, and utilities.

Ultimately, the story hasn’t changed: markets are adjusting to a “higher-for-longer” rate environment compounded by a military excursion’s timeline that continues to get extended. Until there’s more clarity on both inflation and the global energy outlook, volatility is likely to remain elevated.