Welcome to the monthly market update from Midland Wealth Management. I’m Nicholas Hinkebein, Senior Portfolio Manager. Today, I’ll share the Investment Team’s views regarding the economy and financial markets.

Market Recap – March 2026

March marked a clear shift in what drove markets. Energy moved to the forefront, volatility rose, and equity leadership showed early signs of broadening as valuation gaps narrowed, particularly within large-cap technology compared to the broader market, where relative performance became less concentrated.

All major indices finished the month lower, with declines of roughly 5% across the Dow, S&P 500, and Nasdaq.

Energy Market Update

Energy markets experienced a major shock, driven by the escalation of conflict with Iran and the effective closure of the Strait of Hormuz. This waterway facilitates roughly 20% of global oil and LNG supplies and is among the more significant supply disruptions in recent history.

The impact on prices was immediate. Oil surged above $110 per barrel, with some physical delivery of dated Brent exceeding $140, as markets attempted to price both the duration and severity of the disruption. With millions of barrels per day affected, governments are turning to strategic petroleum reserves and rerouting efforts to partially offset the shortfall.

This is moving from risk premium to a truly supply-driven shock to the global economy. While strategic reserves and rerouting efforts may help stabilize conditions over time, the near-term effect has been a sharp repricing of energy and a reminder of just how critical energy infrastructure is to the global economy.

Economic Update

From a macro standpoint, higher energy prices are reintroducing inflationary pressure at a time when markets had become more confident in a gradual normalization of central bank policy. While not yet restrictive enough to derail growth, this dynamic complicates the path forward.

In the near term, the pass-through of higher energy prices to inflation is relatively direct. Energy feeds quickly into CPI and PCE through gasoline and transportation costs, but it also has second-order effects across goods and services. Higher input and shipping costs can pressure margins or be passed through to consumers, slowing the pace of disinflation that has been taking place in recent months. While core inflation has been moderating, a sustained increase in energy prices risks stabilizing or potentially reaccelerating inflation.

This has begun to influence market expectations around interest rates. Prior to the recent energy shock, markets were increasingly confident in a Fed that would continue the easing cycle, supported by softening labor data and improving inflation trends. However, the reintroduction of upside inflation risk, particularly from the supply-driven shock, complicates that path.

This does not necessarily imply a reversal in policy direction, as the Fed’s tools are less effective in addressing supply-driven shocks, but it may affect the pace and extent of rate cuts. Central banks are likely to remain focused on labor market conditions, but with greater sensitivity to inflation expectations. As a result, the market may need to recalibrate toward a more measured and data-dependent easing cycle, rather than a linear path toward lower rates.

Outlook

Looking ahead, markets will stay focused on the balance between energy-driven inflation pressures and the path of monetary policy. While growth has remained resilient, uncertainty around the durability of any resolution to the Iran conflict may delay the normalization investors had begun to expect.

At the same time, improving breadth and more balanced valuations suggest opportunities are expanding beyond a narrow set of mega-cap leaders. We expect near-term volatility as markets adjust, and we remain focused on diversified, high-quality portfolios positioned for volatility and long-term opportunities.

Thank you for joining us on this month’s update. If you’d like to discuss what these developments mean for your portfolio, please reach out to your financial advisor and we’d be happy to have a conversation.