Q1 2026 Market Commentary

ANNIE TRAN, CFA - Senior Portfolio Manager

April 2, 2026

 

“The four most dangerous words in investing are: This time it’s different.”

 – Sir John Marks Templeton

 

“Geopolitical risk at its peak” is how we will most likely remember the first quarter of 2026. The year began with the U.S.

surprise capture of Venezuelan President Nicolas Maduro to face drug trafficking and terrorism charges. By the end of

February, the U.S.–Israeli strikes on Iran sparked a fierce retaliation on the neighboring Gulf nations. The effective closure of the Strait of Hormuz sent energy costs skyrocketing. Despite the shared setting of oil-rich areas, the two conflicts couldn’t be more different.

 

Venezuela proved closer to a best-case geopolitical disruption. Given the country’s diminished role in the global oil

market, which has shrunk sevenfold since the 1990’s, the swift shift toward a more U.S.-friendly posture caused minimal market reaction. Iran, however, is a different story. Conflict has now persisted for over a month, during which time nearly 20% of the global oil and gas supply has been blocked at the Hormuz chokepoint.

 

The consequences were swift and severe: market volatility hit a five-year high; West Texas Intermediate crude surged from the mid-$70s to over $100 per barrel; and U.S. national gas prices closed the quarter at $4.00 per gallon (near $6.00 in

California). Earlier market expectations for two quarter-point rate cuts in 2026 have evaporated entirely, replaced by talk of potential hikes. While stock markets touched correction territory, a late-quarter signal of a possible resolution between Washington and Tehran helped the S&P 500 recoup some losses, closing down almost 7% from its previous high of 7,002 reached on January 28th this year.

 

At the time of writing, the timeline and terms of any ceasefire remain unclear; several elements are worth noting:

1. U.S. energy independence provides a real cushion. As both a major oil producer and exporter, the U.S. is far better insulated than most economies, which remain heavily dependent on imported energy. The 1970s energy shortage that led to long gas lines is unlikely to return here — though they are already being reported across Asia.

 

2. Supply chain disruptions take time to reach consumers. Logistical delays from rerouted shipping, reduced LNG output from damaged facilities, disrupted fertilizer deliveries, to name a few, will ripple through the system over the coming months. Inflation is likely to stay elevated, keeping the Federal Reserve on hold.

 

3. Elevated energy costs accelerate the case for energy diversification. History shows that sustained high energy prices

eventually drive investment in alternatives — Europe demonstrated this effort due to the Russia-Ukraine war. The U.S. has stepped back from these efforts recently, but if energy price remains elevated for an extended time, market forces may

reignite the demand for other energy options that did not exist 50 years ago.

 

Adding to this complexity, the Supreme Court recently struck down the Administration’s emergency tariff authority from last April. While the return of approximately $166 billion in collected tariffs remains unresolved, a baseline 10% tariff remains in place, layering additional costs and uncertainty on the supply chain.

 

Taken together, these forces are pushing inflation higher in the near term — reflected in the 10-year U.S. Treasury yield rising roughly 40 basis points in March and the tax-exempt AAA municipal rate of the same tenor increasing by about 60 basis points. For fixed income investors, this creates an attractive entry point and an opportunity to reassess liquidity needs and portfolio allocations. While the duration of the conflict is hard to predict, the recent market disruptions of 2020 COVID and the series of rapid rate hikes in 2022 serve as useful reminders that, historically, investors with long-term discipline have been well rewarded.

 

On a brighter note, we are excited to introduce Olivier Ly, who has joined our team as a Senior Financial Advisor. Bringing a wealth of market knowledge and experience from investment & CPA firms, Oli will be reaching out to assist with your financial goals. Heads-up: if you hear his response in French, consider it a complimentary bit of international flair with your financial advice. Click the link for more information on our new team member.