It’s hard to believe we are already in the back half of the first quarter, and markets are contending with signs of a softening U.S. economy, persistent inflation concerns, and heightened geopolitical risks from the escalating Middle East conflict. This week’s Market Monitor highlights this week’s key U.S. data releases, alongside the broader implications of the U.S.-Israel military actions against Iran. Equity markets experienced volatility with overall declines, bond yields edged higher amid inflation fears, and commodities saw sharp movements—oil initially surged on supply disruption worries before easing, while gold benefited from safe-haven demand.  The CBOE Volatility Index (VIX) has round-tripped, hitting a recent high of 31 on Monday and dropping significantly to 25 as I write this.¹

Market Overview  

U.S. equities faced downward pressure amid mixed economic signals and escalating tensions in the Middle East, with major indexes swinging from a negative open to a positive close on Monday, as the market tracked every development of the war.  Treasury yields rose modestly, with the 10-year note closing at 4.15%, reflecting renewed inflation concerns from volatile energy prices. Commodities were mixed: crude oil prices were highly volatile, initially jumping over 10% on fears of disruptions through the Strait of Hormuz before settling down about 8% amid reports of potential de-escalation, while gold rose over 2% to around $2,650 per ounce as investors sought safety.²  

Key Economic Releases  

This week's data painted a picture of a cooling labor market and widening trade imbalances, overshadowed by global uncertainties.  

February 2026 Nonfarm Payrolls and Unemployment: Nonfarm payrolls were a big miss, and decreased by 92,000 jobs, far below expectations of a 59,000 gain and marking the sharpest drop in four months.³ The unemployment rate rose to 4.4%, up from 4.2% in January, while average hourly earnings increased 0.2% monthly. Revisions showed January's job growth downgraded to 126,000 from an initial 130,000, highlighting broader softening.⁴  

December 2025 U.S. International Trade Balance: The goods and services trade deficit widened to $70.3 billion, up from $53 billion in November and exceeding forecasts of $55.5 billion.⁵ Exports fell 1.7% to $287.3 billion, led by declines in non-monetary gold, while imports surged 3.6% to $357.6 billion, driven by computer accessories. For the full year 2025, the deficit stood at $901.5 billion, nearly unchanged from 2024.⁶  

ISM Services PMI (February 2026): The index rose to 52.8 from 51.4 in January, indicating continued expansion in the services sector for the 11th straight month, though at a modest pace. Employment and new orders components improved slightly, providing some offset to labor market weakness.⁷  

ADP private payrolls showed a modest gain of 41,000 jobs in February, below expectations, while JOLTS job openings held steady at around 8.9 million, reflecting a balanced but cooling market.⁸  

Trump Administration Policy Updates  

The Trump administration continued to emphasize energy independence amid the Middle East crisis, with calls for increased domestic oil production to counter global supply risks. The administration also reiterated plans to provide insurance for oil cargoes in the Strait, and to provide military escorts if necessary, but the plans were short on details.  Officials reiterated support for U.S. energy firms, potentially benefiting sectors like oil and gas.  

Geopolitical Tensions and Stagflation

The U.S.-Israel joint military operation against Iran continued to escalate on both sides. Oil prices surged up to 13% early in the week on fears of prolonged disruptions in the Strait of Hormuz, a critical chokepoint for 20-25% of global oil and LNG flows, before retreating as the U.S. announced, then denied, escorting tankers through the area.⁹ This volatility exacerbated inflation concerns, with Brent crude settling around $81 per barrel after a 4.7% daily gain mid-week.¹⁰ Gold prices climbed to record highs near $2,665 per ounce, up 1-2% daily, as a safe-haven amid uncertainty.¹¹  Stocks declined broadly, with energy sectors gaining modestly, but tech and consumer discretionary were under pressure from fears of stagflation.¹² Bond yields rose on inflation risks, though Treasuries saw inflows as a defensive play. The conflict's potential to disrupt global supply chains could add upward pressure on energy costs, with analysts warning of risks to olefins and derivatives markets.13 European energy impacts remain lower than the 2022 crisis, but prolonged fighting could tighten global supplies further.¹⁴  

Outlook  

With a disappointing jobs report signaling cracks in the labor market and the trade deficit underscoring external vulnerabilities, the U.S. economy appears resilient in services but at risk from cooling hiring and geopolitical shocks. The Middle East conflict adds layers of uncertainty, potentially sustaining higher energy prices and inflation, which could delay Federal Reserve rate cuts. With a rapidly changing geopolitical landscape and market narratives running wild, we think it's much too soon to make a call on stagflation, intermediate-term energy prices, or prolonged elevated asset volatility.

Best regards,  

Richard Barnett  

Chief Investment Officer  

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Footnotes:  

1. Yahoo Finance, "Stock market today: Dow, S&P 500 end lower, oil slides as Wall Street weighs Iran war signals," March 10, 2026, https://finance.yahoo.com/news/live/stock-market-today-dow-sp-500-end-lower-oil-slides-as-wall-street-weighs-iran-war-signals-200022720.html

2. Reuters, "Oil jumps, dollar rallies with gold as conflict grips Middle East," March 3, 2026, https://www.thestar.com.my/business/2026/03/03/oil-jumps-dollar-rallies-with-gold-as-conflict-grips-middle-east

3. Trading Economics, "United States Non-Farm Payrolls," https://tradingeconomics.com/united-states/non-farm-payrolls

4. U.S. Bureau of Labor Statistics, Employment Situation - February 2026, https://www.bls.gov/news.release/empsit.nr0.htm

5. Trading Economics, "United States Balance of Trade," https://tradingeconomics.com/united-states/balance-of-trade

6. U.S. Bureau of Economic Analysis, U.S. International Trade in Goods and Services, December 2025, https://www.bea.gov/news/2026/us-international-trade-goods-and-services-december-2025

7. Institute for Supply Management, Services PMI - February 2026.

8. ADP National Employment Report and JOLTS data as reported.

9. J.P. Morgan, "US–Israel Military Operation Against Iran: Are Markets on Edge?" March 2, 2026, https://www.jpmorgan.com/insights/global-research/commodities/iran-us-tensions-market-effect

10. Global Banking & Finance Review, "Stocks slide as middle east conflict fans inflation fears," March 2, 2026, https://www.globalbankingandfinance.com/stocks-slide-middle-east-conflict-fans-inflation-fears

11. The Conversation, "What oil, stocks and bonds are telling us about the Iran conflict and how long it might last," March 2, 2026, https://theconversation.com/what-oil-stocks-and-bonds-are-telling-us-about-the-iran-conflict-and-how-long-it-might-last-277326

12. TradingKey, "Middle East Conflict Escalates, Global Stocks and Bonds Fall, Was It Really Caused by One Sentence From Trump?" March 3, 2026, https://www.tradingkey.com/analysis/economic/more/261642809-global-equities-bonds-gold-tumble-together-tradingkey

13. ChemWeek, "Middle East war impact on olefins, derivatives markets widens – S&P Global Energy CERA," March 10, 2026, https://chemweek.com/document/show/phoenix/6183824/Middle-East-war-impact-on-olefins-derivatives-markets-widens-SP-Global-Energy-CERA

14. Montel News, "War impact 'significantly lower' than 2022 crisis – Repsol," March 10, 2026,https://montelnews.com/news/e90e9f67-e7fe-41ee-baad-4c2a8b9e5d63/war-impact-significantly-lower-than-2022-crisis-repsol

Researched and compiled with the assistance of Grok4. This newsletter represents our opined general assessment of the market environment at a specific time and is not intended to be a forecast or guarantee of future performance or results. The opinions and statements expressed are intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities or investment strategies to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. This material may contain estimates and forward-looking statements, which may include forecasts and do not represent a guarantee of future performance. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. The opinions expressed are as of March 10, 2026, and are subject to change without notice. Investing involves risks. Past performance is not a reliable indicator of current or future results, and index returns do not account for fees. It is not possible to invest directly in an index.  

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