I recently got back from traveling with my father in Ireland for two weeks. We had a wonderful time; I enjoyed seeing the village where he and my grandparents grew up, meeting many of my extended family members, and learning the history of Southeastern Ireland. It was a fantastic experience and I hope to someday do the same trip with my son (spoiler alert: my wife and I are expecting a baby boy!). Although I took a break from publishing a newsletter during my travels, I made an effort to stay abreast of the news and developments in the markets. The content in this week's newsletter is both my perspective on what happened this past week and the several weeks prior while I was out.

I hope you enjoy it!

Kevin

P.S. I'm trying a new format with this week's edition and welcome any and all feedback. Please let me know if you prefer this layout or the previous version with a link to an external PDF.

March 29, 2026

My Thoughts on
the Market

Weekly Edition

How did the markets do?

• Stocks had their worst week since 2022. The S&P 500 is now down about -8.7% from its high. Meanwhile the Dow and the Nasdaq both fell into correction territory, down roughly -10% and -12% from their peaks in February.
• Interestingly, the stocks that are leading the selloff are the same stocks that led the rally last year, reinforcing the importance of diversification and not over allocating to whatever has performed well recently. Smaller company stocks and value-oriented investments have held up better than large tech names, which is a sign that markets are broadening out beyond the Magnificent 7 theme of last year.
• Bonds were volatile too; with Treasury yields ending the week higher (meaning bond prices fell). Volatility in the bond market increased this week and has remained elevated throughout the Iran conflict. This is a reflection of investors becoming worried about inflation.

What headlines moved the markets?

• The war with Iran continues to rattle investors. The Strait of Hormuz closure is reigniting fears of stagflation as the effects of an energy crisis ripple through the global economy.
• Oil prices jumped back above $100 per barrel as President Trump gave Iran a 10-day ultimatum to reopen shipping lanes. Markets however expect that deadline to move and are pricing in another TACO (Trump Always Chickens Out) type scenario.
• Oil isn't the only commodity affected by the closure of the Strait of Hormuz; fertilizer, plastics, rubber, helium (used in semiconductor manufacturing), and the cost of shipping are all being impacted. More on this below in the Quote of the Week section.
• Fed policy uncertainty returned as inflation concerns resurfaced. The Federal Reserve left interest rates unchanged and acknowledged increased uncertainty due to the conflict in the Middle East.
• Markets now see a 52% chance the Fed might actually raise rates again this year instead of cutting them. Higher energy costs act like a tax on consumers and businesses, driving prices higher and disposable income lower.
• For now, patience is the right posture. The Fed is in a wait-and-see mode, and so are we. This is exactly why we maintain diversified portfolios.

Quote of the week

"Today's war harkens back to David and Goliath. Iran has a seemingly unlimited supply of cheap bombs loaded onto drones and speedboats like rocks to a sling, while our defenses are measured in the millions of dollars per shot." – William Gilmore, my Portfolio Manager/Business Partner

Why does closing the Strait of Hormuz give Iran so much leverage?

• About 20 million barrels per day of crude oil and petroleum products move through the Strait, roughly one-fifth of the world's oil supply. The recent closure is the largest disruption to the energy markets since the 1970s oil embargo.
• Asian markets, namely China, are the main recipients of oil moving through the Strait, and cutting off that supply means that demand for oil produced elsewhere will rise (such as Russian oil, hence the reason President Trump lifted the embargo on Russia). Economics 101: prices are a function of supply and demand - if the demand for oil remains constant and the supply decreases, then the price will invariably go up. This price spike is expected to decrease global GDP by -2.9%.
• Petroleum is not only used for energy production, its byproducts are also critical for the agricultural industry. About one-third of the world's fertilizer passes through the strait, including urea and ammonia. Urea prices have increased approximately 50% since the start of the conflict. The price shock and shortage of fertilizer during the spring planting season could reduce crop yields significantly and potentially increase global food prices into 2027.
• This is especially impactful on nitrogen-intensive crops such as corn, which in turn is the main feedstock for beef, poultry, and dairy. The knock on effects of a fertilizer shortage could be widespread and lead to starvation in less developed countries.
• Other petroleum byproducts such as naphtha and helium have also been in short supply due to the closure. These are necessary in the production of other goods such as plastics and semiconductors. And currently Europe is experiencing a shortage of liquified natural gas (LNG) coming out of a harsh winter, causing local prices for LNG to climb.

Which industries are being hit the hardest?

• Airlines. Jet fuel is one of the most immediately impacted products. Expect the price of your next plane ticket to cost more as jet fuel typically accounts for 25–40% of airline expenses.
• Logistics and trucking. Higher diesel costs affect every delivery in the economy.
• Agriculture and food producers. A fertilizer shortage couldn't come at a worse time than during the spring planting season.
• Tech manufacturing in Asia. Semiconductors are energy-intensive to produce, and energy constraints in South Korea, Taiwan, and Japan ripple directly into global electronics supply chains.
• Banks and financial companies. Financials are down 11% year-to-date as the yield curve has dramatically flattened, cutting banks' profits.
• Automakers and consumer goods companies. Rising plastics and aluminum costs feed directly into their manufacturing costs.

Cui bono? Who benefits?

• U.S. domestic oil and gas producers. This is the clearest winner. The U.S., as the largest oil producer in the world and a net energy exporter, gains strategic influence as the globe scrambles for alternative supply. US oil company stock shares are soaring as investors are betting on increased production domestically to fill the void (insert a monologue about the importance of the Permian Basin by Billy Bob Thornton's character from Landman).
• Oil tanker shipping companies. As the Strait remains closed, tankers are being forced to take the long route around the Cape of Good Hope, nearly doubling the ton-miles required to move oil to Asia and Europe. Shares of tanker giants like Frontline and DHT Holdings have jumped as much as 60% year-to-date.
• U.S. LNG exporters. American LNG export terminals are running at full capacity right now supplying Asian countries previously served by Qatar.
• Defense contractors. Not to state the obvious, but global conflict and instability is a boon for defense contractors like Lockheed Martin.

The US has the strongest military in the world, so why can't it reopen the Strait?

• Sea mines; cheap to lay, costly to clear. Laying mines can be done from ordinary fishing boats, indistinguishable from normal Persian Gulf traffic. Analysts estimate Iran possesses upward of 5,000 – 6,000 naval mines stockpiled specifically for this scenario. Even a limited Iranian mining campaign would mean a closure for months.
• The U.S. entered this crisis without adequate tools for the most critical task. In 2006, the Navy dismantled its Mine Warfare Command, and its minesweeping capabilities have since atrophied. The Navy planned to replace minesweepers with specially equipped ships, but found significant challenges, including failure rates of mission-essential equipment, and have not invested in modern minesweeping technology.
• Iran has almost 1,000 miles of coastline from which it can launch anti-ship missiles. Those missile batteries are mobile, making them harder to eliminate. Iran's "mosaic defense" relies on asymmetric, distributed, guerilla-style attacks specifically designed to offset American conventional superiority in the confined waters of the Persian Gulf.
• Insurers don't want to shoulder the risk of a ship being attacked or hitting a mine. Naval insurers have withdrawn coverage across much of the region - and without insurance, ships don't move.

What should we expect to happen if the Strait remains closed for a prolonged period?

• The return of greater than $5-per-gallon gasoline.
• More expensive food at the grocery store.
• Higher costs for consumer products that use plastic, even the packaging is going to become more expensive.
• The Fed can't cut interest rates while energy-driven inflation remains high, so don't expect mortgage rates, car loans, or credit card rates to come down anytime soon (contrary to the expectation a month ago of several rate cuts on the horizon).
• Anticipate mixed results for your portfolio: energy stocks and consumer staples are rising while tech and financials are falling. The tech-centric investment strategy that worked well last year is struggling right now. It's also too late to make changes, do not make the emotional decision to sell-low-and-buy-high, that's a fool's strategy.

Conclusion

• Every day the Strait remains closed, the economic pressure on all parties, including Iran, intensifies.
• US oil production benefits from high prices, whereas consumers don't. Expect a tug-o-war of influence on President Trump to both claim a swift victory and to continue to draw out the conflict.
• The only reassurance is that the midterm elections are seven months away and the longer this conflict persists, the greater the reckoning at the ballot box will be.
• Reduce expenses where you can, draw from your savings instead of the portfolio, and remember that this too shall pass.

Have a nice week ahead!

Kevin