Market Flash - Military Action in Iran

Markets in a Minute: Private Credit: Between Pressure and Performance

Key Takeaways The start of the Iran conflict and related oil shock drove the S&P 500 index to its first quarterly loss since early 2025. But some corners of the market fared better than others. The conflict-driven surge in oil prices has created new inflationary pressures and dampened expectations for rate cuts this year. The broad U.S. bond market was flat in the first quarter amid new headwinds for fixed income. The U.S. economy entered the latest Middle East crisis on pretty solid ground, which bodes well for its ability to withstand the shock, with some important caveats. After finishing strong in 2025, the broad U.S. equities market got off to a rocky start this year. Stocks initially traded higher during the first quarter, but the onset of the Iran conflict in late February and resulting global spike in oil prices clouded the economic picture and triggered a broad selloff. When the dust settled, the S&P 500 posted its first quarterly loss in a year (-4.3%). Does a difficult first quarter portend a down year? Not necessarily. In this week’s Markets in a Minute, we unpack first quarter performance and touch on some reasons to be cautiously optimistic about the balance of the year. Pockets of Resilience As usual, even in a down quarter, some corners of the market held up better than others. Six out of 11 S&P 500 sectors actually had positive returns for the quarter, although Energy was the clear winner. Even before the start of the Iran conflict, energy stocks had been gaining ground, lifted by solid earnings growth tied to data-center demand and the broad sector rotation that began in late 2025. In fact, in a few areas of the market, the conflict only accelerated a trend that was already underway. For the past several years, the market’s gains were largely driven by a small group of megacap technology stocks. Last fall, however, the landscape began to shift. Investors started looking beyond big tech for returns, resulting in more broad-based (and ultimately healthier ) market performance. Sectors such as Energy, Industrials, and Materials have been clear beneficiaries from the recent rotation.