Economic Update 3-23-2026

Economic news for the week included the U.S. Federal Reserve keeping interest rates on hold, as expected. Producer prices rose more than expected, pointing to further inflation, while industrial production rose slightly, and housing data remained weak, although these were at least partially tied to weather conditions.

Equities fell back globally with the escalating conflict in the Middle East weighing on future prospects for inflation and economic growth, primarily due to the sharp rise in energy prices. Bonds also fell back as yields rose, for the same reasons. Commodities were mixed, with metals down, but oil prices higher, particularly for overseas contracts as opposed to U.S.

U.S. stocks started the week decently, until mid-week, when stronger-than-expected producer price inflation was taken negatively. Middle East news included a lack of NATO participation, continued attacks from Iran on oil and gas infrastructure and tankers, the death of the Iranian security chief, and Israel escalating attacks towards Iranian oil-gas assets (which had previously been avoided). By sector, energy stocks led the way again, up around 3% with the gains in oil prices. Laggards included the mixed group of utilities, materials, and consumer staples, all down over -4% based on unique assumed exposures to economic and inflation risks.

The oil-gas infrastructure attacks are significant, as they mark a departure away from a ‘no go’ target (to avoid even further disruptions to global petroleum prices), towards direct aiming at the Iranian economic engine. No doubt, the balance between those two factors will continue to be carefully watched as the risk/rewards change. Financial markets appear to be viewing the Middle East conflict through several potential stages. The first is the impact on inflation, which rises the longer that high oil prices persist, including the rising potential for physical shortages in some regions, which would only magnify the price problem. From this, a second order effect would be the impact from high energy costs on economic growth. This doesn’t seem to have come to the forefront yet, but no doubt could even have a more negative effect on sentiment if odds of a recession rise higher.

Foreign stocks behaved similarly to domestic in developed markets, with the same Middle East inflation and growth repercussions remaining top of mind, but a bit more so due to a higher sensitivity to oil from the region. Emerging markets fared better on net, from exposure to higher commodity prices as well as tech hardware-related South Korea. While the ECB kept interest rates on hold, they raised their 2026 inflation estimates sharply from 1.9% to 2.6%, which was taken negatively. The Bank of England also kept policy unchanged, but shared similar inflation warnings. The Bank of Australia raised rates by 0.25% to 4.10%, due to stronger inflation expectations and otherwise decent conditions, while the Central Bank of Brazil cut rates by -0.25% to 14.75%, as the economy showed cooling. No doubt, geopolitical conditions have served to magnify differing opinions of impacts on regional economic and inflation dynamics.

Bonds continued to pull back as interest rates moved higher across the yield curve, due to concerns about sustained oil price spikes morphing into higher inflation readings over the coming weeks and months. Corporate credit fared best, along with higher yields, while floating rate bank loans fared best along with their inherent variable rate component. Foreign bonds fell back due to rising rates, in both developed and emerging markets, due to the same inflation-based factors.

Commodities were mixed last week, with additional gains in energy offset by declines in industrial metals and precious metals. Global oil markets oddly diverged dramatically last week, with West Texas intermediate crude prices (U.S. benchmark) actually falling -1% to $98/barrel, while Brent crude prices (European and ex-U.S. index) gained another 9% to over $112/barrel. There has always been a minor pricing difference, based on distinctions in oil quality from different locations and shipping costs, but the Middle East conflict has highlighted the sensitivity of supplies in Europe and Asia, while the U.S. has remained self-sufficient to a large extent (although not completely). Distillate prices also continued to see price rises. Gold prices fell back again as higher interest rates weighed on technicals.





Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.