Key Takeaways
- Geopolitical tensions in Iran pushed Brent crude to US$100 and closed the Strait of Hormuz. This disruption triggered a global market slide, with major indices in Japan and Germany falling over 10%.
- Our Fear and Greed Index hit 24, signalling an extreme fear event that historically precedes a recovery. Data shows these shocks occur nearly every year and often lead to positive returns shortly after.
- Massive AI investment continues with hyperscalers projected to spend US$660 billion in 2026. Meanwhile, the upcoming US midterms may create a divided government, a gridlock that often stabilizes volatile markets
Geopolitical tensions in Iran escalated sharply in March, pushing Brent crude to US$100 a barrel and disrupting one of the world’s most critical trade arteries. The Strait of Hormuz — a 33‑kilometre‑wide chokepoint that carries 20% of global petroleum — was effectively shut. More than 200 vessels were reportedly stranded as the passage became impassable.
The impact rippled far beyond oil. The strait moves 10.8 billion cubic feet of LNG per day, over 30% of global fertilizer exports, 8% of global aluminium and nearly half of the world’s sulphur trade. The International Energy Agency described the situation as the most severe energy security crisis in modern history. Equity markets reacted accordingly. Every market in our monitored list ended the month in negative territory, with South Korea, Japan, India, Taiwan and Germany suffering declines of more than 10%.
As of late April, the Strait remains effectively restricted, oil has climbed past US$106, and peace talks have stalled. Yet markets have responded differently than most expected.
Key Market Performance for March 2026
**Disclaimer: Past performance is not indicative of future performance
The Perspective Investors Often Miss
The headlines are loud, and the situation is serious. But there is an important perspective that tends to get lost in the noise.
“Extreme fear events are not rare”
Our proprietary Fear and Greed Index, built from market indicators that tend to move together when sentiment shifts, fell to 24 during the Iran conflict. Since our threshold for extreme fear is 25, this episode clearly registered as a meaningful shock.
But extreme fear is not as rare as many investors think. Since 2015, markets have slipped into extreme fear ten times, which is almost once a year. When we compare those episodes, the current Iran conflict ranks as the mildest. It crossed the threshold, but only slightly.
This is important because extreme fear has historically been a setup for recovery rather than collapse. Our analysis of the S&P 500 Index shows that when sentiment reaches these lows, the market often delivers positive returns as early as one month later.
The 2020 pandemic was the major exception, with markets falling further before rebounding. Yet investors who stayed invested through the uncertainty saw a gain of 33.41 percent one year later. The only other meaningful deviation was in February 2022, when the Russia and Ukraine conflict collided with aggressive rate hike expectations and recession concerns. Even then, investors who entered at the start of that conflict saw losses limited to 7.55% after one year, before participating in a multi-year rally.
The lesson is consistent. Extreme fear is uncomfortable, but it has rarely been the end of the story.
How the MYTHEO Fear and Greed Index Tracks the S&P 500 from 2013 to 2026
S&P 500 Returns After Entering the Extreme Fear Zone
**Disclaimer: Past performance is not indicative of future performance
Don’t Lose Sight of Other Catalysts
While the market is fixated on the Iran conflict, several forces are quietly building that could replace today’s headlines and redirect the market entirely.
The market is fixated on war, but other forces are moving in a completely different direction. AI spending has not slowed for geopolitics. In 2025, five major hyperscalers (Microsoft, Amazon, Alphabet, Meta, and Oracle) spent a record US$394 billion in capital expenditure. Their guidance for 2026 points to more than US$660 billion. That is a year-on-year jump of over 67.5%
Top Five Hyperscalers Capital Expenditure (US$’bil)
Note: Historical figures are taken from each company’s annual report. The 2026 projection reflects the average of management guidance
Investor appetite for AI remains aggressive. On 31 March, OpenAI announced record committed capital of US$122 billion, valuing the company at roughly US$852 billion. Anthropic is also exploring the design of its own chips to bypass the industry shortage of AI processors.
Anthropic is reportedly exploring the idea of designing its own chips as the industry grapples with a shortage of AI processors needed to train and run more advanced systems.
Potential regime changes in Iran or shifts in the political landscape of Venezuela could eventually unlock two of the world’s largest oil reserves. Both are currently sidelined by sanctions and internal politics. If these constraints ease, the resulting surge in supply could shift the energy market from a shortage to an oversupply, placing significant downward pressure on prices.
While it is impossible to predict the exact timing of such shifts, they remind us that the forces creating short-term price spikes can eventually lead to different fundamental realities.
US Midterm Elections: The Politics That Could Become a Market Wild Card
Currently, Republicans hold the keys to both the House and the Senate, providing Donald Trump with a relatively clear path to implement his second term agenda. However, the upcoming midterm elections on November 3, 2026, represent a major variable that the market may be underestimating.
How Seats Are Currently Distributed in the United States Senate and House of Representatives.
As of mid-April, President Trump’s net approval rating is around -17%. While his party currently runs the show in Washington, even a small shift in the 2026 election results could lead to a complete standstill in passing new laws.
Trend of Trump Approval Ratings Since Inauguration in January 2025
Usually, political tension is seen as bad news for the stock market. But given how unpredictable and disruptive the current administration’s policies have been, many investors now see a divided government as a helpful safety net. For example, the war in Iran began without any approval from Congress.
In a strange way, markets often prefer it when the two parties are stuck. A divided government acts as a check on extreme ideas from either side, such as sudden new tariffs, massive tax changes, or the president overstepping his authority. The biggest issue for the market hasn't been Trump’s specific goals, but the sheer chaos that comes with them. Because of this, a "gridlocked" Congress might be exactly what is needed to bring some stability back to the economy.
Focus more on Fundamentals and the Future
The Iran conflict is a major geopolitical event, but the data shows it is being priced as one of the milder fear episodes of the past decade. History consistently shows that shocks feel overwhelming in the moment, yet their market impact fades faster than expected. Past events tend to lose significance as fundamentals and future drivers reclaim the narrative, and markets quickly redirect attention to what truly shapes long‑term returns.
Markets are forward‑looking. Structural forces like accelerating AI investment and the potential stabilising effect of a divided US government are far more likely to drive the next major repricing than short‑term headlines. This is a moment to stay invested, not defensive.
Tracking these shifts requires time and expertise. Focus on what you do best and let MYTHEO handle the heavy lifting of your investment journey. As Warren Buffett famously said, be greedy when others are fearful. Every crisis feels different from the inside, but none of them have ever been the end of the story.
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This material is subject to MYTHEO’s Notice and Disclaimer.
