U.S. equities experienced significant volatility in the first quarter of 2026, culminating in their worst performance since 2022. Despite a strong rebound on Tuesday, with the S&P 500 closing up 2.9%, the Nasdaq rising 3.8%, and the Dow gaining 1,125 points, the broader trend for March was negative. The S&P 500 fell 5.09% and the Nasdaq Composite declined 4.75% over the month, while for the quarter, the S&P 500 dropped 4.6% and the Nasdaq declined 7.1% [1].
The primary driver behind these declines was the U.S.-Israeli war on Iran, which led to a near-total blockade of the Straits of Hormuz. This waterway is crucial for global oil transit, and its disruption caused oil prices to surge. Brent crude posted its largest monthly percentage increase ever, rising more than 60%, while U.S. West Texas Intermediate crude climbed over 50% in its biggest one-month gain since 2020 [1].
These oil price increases translated directly into higher fuel costs for consumers, with the average price of unleaded gasoline reaching $4 per gallon on Tuesday, up more than 34% in just four weeks. The impact extended beyond gas prices, affecting U.S. households and retirement accounts, as more than half of American adults own stocks, often through diversified retirement funds [1].
Analysts at Bespoke Investment Group noted that stocks have been following oil prices at an unprecedented rate, warning that if the U.S. withdraws from the Middle East while the Strait remains blockaded, energy markets would stay supply-constrained and prices would remain high. They cautioned that prolonged high prices and limited supplies would worsen the global economy and ultimately depress stock prices further [1].
The market turbulence stands in contrast to President Donald Trump's previous assertions that his leadership would bolster the stock market. During his 2024 campaign, Trump claimed that a loss would trigger a crash similar to 1929, but the second term has so far seen wild swings and negative performance [1].
CONCLUSION
The first quarter of 2026 saw U.S. stocks post their worst performance since 2022, driven by geopolitical tensions and a historic surge in oil prices. Analysts warn that continued supply constraints could further harm the global economy and equity markets. The volatility challenges President Trump's economic claims, highlighting the unpredictable impact of international conflict on financial markets.