This week, escalating geopolitical tensions in the Middle East further intensified volatility across global capital markets. The conflict with Iran continued to weigh on financial markets as diplomatic efforts showed little progress. Iran rejected a 15 point proposal from the United States, instead submitting conditions that included authority over the Strait of Hormuz, while President Trump extended the deadline for strikes on Iranian energy infrastructure by 10 days.

Amidst this uncertain backdrop, the S&P Global flash Purchasing Managers Index (PMI) data for March pointed to slowing growth and rising prices. The Composite PMI fell to 51.4 from 51.9, an 11-month low and the weakest quarterly reading since late 2023. The Chicago Fed National Activity Index also signaled slowing, retreating to -0.11 in February from 0.20 the prior month. Meanwhile, initial jobless claims edged up to 210,000 while continuing claims fell to 1,819,000, the lowest since May 2024. The University of Michigan consumer sentiment index slipped to 53.3 in March, the lowest reading of the year, as gasoline prices and uncertainty eroded household confidence.

Treasury yields moved higher as energy driven inflation concerns outweighed softer growth signals. The 2-year U.S. Treasury yield rose to approximately 3.92% and the 10-year to approximately 4.41% at the time of this writing, both near their highest levels since July. U.S. equities extended their decline, with the S&P 500 falling approximately 1% to close near 6,480, its fifth consecutive weekly loss and approximately 8% below the all-time high set in late January. West Texas Intermediate crude oil traded in a wide range, dipping toward $90 per barrel midweek before rising back to approximately $95 after Iran rejected peace talks. Gold continued its retreat, trading near $4,400 per ounce as elevated yields and a stronger dollar reduced demand.

The Chandler team believes the elevated uncertainty combined with signs of slower growth and commodity driven inflationary pressure leaves the Federal Reserve with little room to ease. Whether the oil-driven inflation impulse proves temporary or filters more broadly into core prices will be the central question for monetary policy ahead. We expect the federal funds rate to remain at 3.50% to 3.75% through at least midyear, with one cut possible in the second half of 2026 if energy costs decline and core inflation resumes its path toward the Fed’s 2% target. Portfolios remain positioned with an emphasis on safety, liquidity, and disciplined credit risk management as we expect the yield curve to steepen gradually.

Next Week: Dallas Fed Manufacturing Activity, Conference Board Consumer Confidence, FHFA House Price Index, S&P CoreLogic Case Shiller Home Price Index, ADP Employment Change, ISM Manufacturing PMI, JOLTS Job Openings, Jobless Claims, ISM Services PMI, Nonfarm Payrolls, Unemployment Rate, Factory Orders

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