Three developments defined March 2026: (1) Operation Epic Fury — US/Israeli strikes on Iran blocked the Strait of Hormuz, stranding 200+ tankers and introducing a stagflationary supply shock into global markets; (2) AI Disruption — Oracle, Meta, Atlassian, and Block announced mass layoffs citing AI-driven restructuring, while Anthropic's leaked Mythos model rattled cybersecurity valuations; (3) Private Credit Stress — elevated fund redemptions tested quarterly liquidity limits, raising the risk of widening credit spreads. Portfolio considerations address a potential regime shift from disinflationary to stagflationary, and a watch on consumer resilience as the personal savings rate hits 4.5% and gas prices cross $4/gallon.
From the original report
Selected passages from the original publication. Historical observations reflect the report's publication date, not current market advice.
1) Operation Epic Fury – The dominant story of March. US/Israeli strikes on Iran began Feb 28, triggering Gulf-wide retaliation, blocking the Strait of Hormuz and stranding over 200 tankers. Signs of waning hostilities have lifted markets; however, given the damage to energy assets in the Persian Gulf, higher energy prices may persist after hostilities end.
3) Private credit stress test – The Iran war and SaaS software selloff triggered elevated redemptions across private credit funds. Some managers chose to pay redemptions in full, while others enforced quarterly limits (typically 5% of assets). While we don’t yet see this as a systemic issue, there is risk that redemptions beget more redemptions, possibly causing credit spreads to continue to widen and raising the cost of capital broadly.
Regime change? – Entering 2026, the macro backdrop featured falling inflation, positive growth, and a Fed that had begun cutting rates. This textbook disinflationary environment tends to broadly reward risk assets. The Iranian conflict has introduced a stagflationary pulse, with supply shocks (oil, natural gas, chemicals…) feeding into prices while uncertainty weighs on growth expectations. The key question for portfolio positioning is whether this proves transitory or whether the conflict or infrastructure damage persist long enough to entrench higher input costs and slower growth. We have been shifting portfolios on the margin to prepare for the latter.
Consumer Resilience – Consumer spending has been the backbone of GDP growth, but the cushion is thinning. The personal savings rate sits at 4.5%, roughly half its long-term average, gas prices have crossed $4/gallon, and the jobs report for March -- while a headline beat at 178,000 -- revealed cooling wages and a shrinking labor force. April's retail sales data will confirm whether the oil shock is beginning to crimp the spending that has kept this expansion intact.
For educational purposes only; not individualized investment, tax, or legal advice. Investing involves risk, including loss of principal.
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