Escalation and Uncertainty. Those two words are the driving forces in markets right now. This week the war with Iran escalated to include strikes on vital energy infrastructure. Iran’s South Pars natural gas field- the biggest source of Iran’s domestic energy- was struck. Iran responded with attacks on refineries in Saudi Arabia and Kuwait as well as Qatar’s giant Ras Laffan, the world’s largest liquified natural gas plant. Moving to Uncertainty. The Fed held the policy rate unchanged as expected, but the details of the vote, committee projections and Chair Powell’s commentary tilted everything hawkish. The S&P ended the week down 2%. It’s the fourth straight weekly decline and ninth in twelve. The weakness was broadly dispersed but the equal-weight slightly outperformed as did small and mid caps.

It’s no surprise that Energy led this week. Financials held in there. Both regional and large banks stayed away from large declines on Friday. Credit names swung between gains and losses generally. Tech was about flat heading into Friday before selling off. The ICE Semis index ended modestly higher. Yield proxies came under fire, especially to close the week. Utilities and Real Estate lagged and led the decliners on Friday with yields jumping. They’ve been outperformers this year, so stood to be a source of funds. Consumer Staples didn’t hold up as a Defensive play as it was among the worst performers. Materials sold off across the board, with rising input/energy costs a focus, while miners were under pressure as metals sold off- especially gold.

Short-term Treasury yields started the week by moving lower but ripped higher on all the central bank news. The 2-year was up over 15bp this week to about 3.90%, but the yield curve Bear Flattened as 10yrs rose 10bp and 30yrs rose just 3bp. The US moves are at least partially in response to much bigger international moves. 2yr yields in the UK reached the moon before NASA’s upcoming Artemis launch, flying ~50bp.

Looking ahead, Iran headlines will again be the driver. Putting that aside for now, Baseball is back, and the New York Yankees and their former neighbor, the San Francisco Giants, kick off the 2026 season next Wednesday, March 25 on Opening Night, the earliest opener in league history. For those that like brackets, the NCAA basketball tournaments will be in full swing. Already had some crazy moments. The Fed’s media blackout is over, so we’ll hear a lot of discussion about each members outlook and reasoning. Flash PMIs for March will be released, which should include events after the war with Iran started. Earnings will include KB Home, Paychex, Winnebago, Jefferies and Carnival. Have a great weekend and enjoy Spring!