The S&P 500 (Index: SPX) dropped 1.9%, or 125.73 points, below its previous week's close to end the third trading week of March 2026 at 6,506.46. The index is nearly 6.8% below its 28 January 2026 record high close of 6,978.59.
The escalation of oil and gas prices resulting from the Islamic Republic of Iran's efforts to shutter oil container ship traffic through the Strait of Hormuz continued to set the big economic stories of the week. Oil prices rose during the week, reaching over $150 per barrel in the eastern Asian nations that receive the bulk of their oil supplies by sea from Persian Gulf nations.
Oil prices elsewhere have risen, but not by as much. In the U.S., West Texas Intermediate oil spot prices ended the week below $100 per barrel, or around $30 per barrel higher than in February 2026. This surge is expected to add inflationary pressures to the U.S. economy, which led to the biggest market-moving headline of the week that was. Rate cuts by the Federal Reserve are no longer on the table for 2026.
The CME Group's FedWatch Tool no longer projects any interest rate cuts through the end of 2026, which it now gives a 0% probability of occurring. Instead, the tool indicates a low probability of rate hikes, giving a 32% probability of a quarter point rate hike in the Federal Funds Rate being announced after the Fed's Open Market Committee meets on 28 October (2026-Q4).
Investors responded by sending stock prices lower, especially after the Fed acted to hold rates steady at the end of its two-day meeting on Wednesday, 18 March 2026. The latest update of the alternative futures chart puts the trajectory of the S&P 500 below the redzone forecast range we added several weeks ago, which is now pulling double-duty as a working counterfactual for indicating where the S&P 500 would be if not for the geopolitical event of the Iran war.
Using the mid-point of the redzone forecast range as a counterfactual reference, we find the S&P 500 ended the week of trading on 20 March 2026 about six percent below where it would have been in the absence of the event.
Here are the week's market-moving headlines, which prominently features the volatility of oil prices and the change in investor expectations for Federal Reserve rate cuts in 2026:
- Monday, 16 March 2026
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- Signs and portents for the U.S. economy:
- Falling oil prices send Wall Street toward its best day since the start of the Iran war
- US, China seek to wrap Paris talks on managed trade, agriculture deals for Xi-Trump summit
- US manufacturing output increases; homebuilder sentiment ticks up
- Fed minions trying to cope with foggy crystal ball:
- Bigger trouble still lurking in China:
- BOJ minions waver on plan for interest rate hikes:
- ECB minions excited to participate in meeting of central bankers to address surge in oil prices:
- Wall Street recovers, ends green as Brent stays at $100/bbl and the Middle East war continues in focus
- Tuesday, 17 March 2026
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- Signs and portents for the U.S. economy:
- Oil prices jump more than 2% after renewed Iranian attacks on UAE
- US pending home sales rebound on lower mortgage rates before Iran war
- Fed minions starting to realize how badly they let Bidenflation get out of control, expected to keep rates steady:
- Bigger trouble, stimulus developing in China:
- Chief BOJ minion obsessed with trying to generate wage-price inflation cycle in Japan:
- Badly informed Eurozone politics infects ECB minions' succession:
- U.S. stocks extend gains as investors expect no change to interest rates
- Wednesday, 18 March 2026
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- Signs and portents for the U.S. economy:
- Oil extends gains to rise 5.6% after Iran attacks Gulf energy facilities
- US oil exports seen rising as WTI discount to Brent hits widest in 11 years
- US poised to waive summer gasoline regulations to ease prices, sources say
- US producer inflation runs hotter in February, expected to accelerate further amid Iran war
- Before: Fed minions expected to hold rates steady, then do as they were expected:
- After: Fed does the expected, chief Fed minion says he won't be forced out despite blowing out budget for Fed building renovation:
- Fed leaves interest rates unchanged, expects inflation to climb
- Fed's Powell confirms Trump is stuck with him until DOJ probe is 'well and truly' over
- Powell says tariffs keeping inflation elevated, Fed watching energy prices closely
- In a shift, one Fed policymaker sees a rate hike ahead
- Powell says 'stagflation' is a 1970s term, not what we face today
- Another oil price jump further pushes out Fed rate-cut odds
- ECB minions say it's no time to ease bank rules:
- Wall Street snaps winning streak as Fed keeps rates unchanged, inflation fears loom
- Thursday, 19 March 2026
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- Signs and portents for the U.S. economy:
- Brent up but off highs, US crude finishes with small loss
- Natural gas prices soar as doomsday scenario unfolds; Iran, Israel strike infrastructure
- US pump prices jump 30% since Middle East war began, headed toward $4 a gallon
- Wall Street bank capital to fall 4.8% under new rules, in win for industry
- US new home sales drop to near 3-1/2-year low in January
- Bigger trouble, lesser stimulus developing in China:
- China's robust iron ore imports are going into storage, not steel
- China set to keep rates steady as Mideast war clouds inflation outlook
- BOJ minions' plans to hike Japan's interest rates thwarted by Iran war:
- ECB minions hold Eurozone interest rates steady, staring to think their perfect monetary policy might need rate hike to fight oil price inflation:
- ECB keeps rates unchanged but signals readiness to act on energy
- ECB expects rate hike talks in April with move more likely in June, sources say
- Wall Street ends in the red for a second day as inflation fears take center stage
- Friday, 20 March 2026
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- Signs and portents for the U.S. economy:
- Fed minions trying to learn from worst bank failure in years, having trouble reading monetary needs of U.S. economy:
- Bigger trouble developing in China:
- Other central banks starting to think about rate hikes:
- ECB minions say they will keep their perfect monetary policy for Eurozone and won't change it unless they must:
- U.S. stocks end lower for a fourth consecutive week as Iran war concerns loom over sentiment
The Atlanta Fed's GDPNow tool forecast of real GDP growth in 2026-Q1 fell to +2.3%, rebounding from the +2.7% growth anticipated a week earlier.
Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Federal Reserve official pointing to a news ticker that says 'IRAN WAR: OIL PRICES SURGE' as other officials take a box marked '2026 RATE CUTS' away from a suit wearing Wall Street bull and bear who are upset".