Oil, War, Interest Rates, and Gold – March Recap

March was dominated by one news story: the US-Iran war and its effect on oil prices. But in the background, the effects were wide and touched far beyond just equities. Join The Chartist’s head of trading and research, Zach Radge, as he explores the major events of March and their implications.

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Video Transcript

Hi there. I’m Zach Radge, head of trading and research at The Chartist. Welcome back to another monthly recap. This one’s a little different to the usual format.

March is technically behind us, but the story it started is still very much in play. We had a ceasefire announced Tuesday night. The Islamabad talks are getting underway as I’m filming this, and the March CPI is landing tonight. So rather than treat the month as a closed book, I want to run through what markets did in March and then bring it right up to where we are right now, because the two are inseparable.

I’m going to assume you know most of the headline details already. Hormuz closed, oil spiked, markets fall.

What the War Did to Markets in March

But it’s worth putting some numbers on it because the scale of movements was genuinely historic. Brent crude surged over 55% for the month, its steepest monthly rise since the oil crisis of the ’70s, hitting $115 per barrel from the $70 range it had been sitting at before the crisis began. The Bloomberg Commodity Index posted its single biggest month since May 2009, driven almost entirely by energy.

This energy shock fed directly into equities, and the damage was broad. What made this different from January and February, though, was the character of the selling. Last month, I spoke about a rotation out of growth and into value. In March, though, that rotation was abandoned into outright de-risking. Growth and value both fell together. The S&P 500 equal weight index, which had outperformed across February, ended March down 6%.

But of course, as we spoke about last month, an oil shock of that magnitude doesn’t just hurt equities in isolation. It flows straight through into inflation expectations and then into interest rates and bonds. US Treasury yields rose as the market priced out rate cuts that had been on the table at the start of the year.

Rates and the Fed’s Difficult Position

Fed Chair Jerome Powell’s response was to signal he’d look through the energy-driven spike for now, on the basis that tightening into a supply-side shock tends to bite the economy well after the shock has already passed. Despite this, rate hike probabilities for later in 2026 have been creeping up, and people are starting to throw the word stagflation around again.

Across the month, the spike in energy prices raised the US dollar against most major currencies. With oil contracts priced in US dollars, the rise in value of oil naturally sends global demand for US dollars spiking as well. And that US dollar strength, combined with the Treasury yield move we just discussed, sparked a sell-off in gold.

Gold: A Counterintuitive Selloff?

We usually think of precious metals like gold gaining in value during times of uncertainty, such as wars and rising inflation. But gold fell around 13% in March, its worst month since October 2008. That may seem counterintuitive, but it follows directly from what we just discussed. The energy shock drove yields and the dollar higher simultaneously, which is a tough environment for gold, regardless of what inflation is doing.

Nick put it succinctly in his managed account update, and I’m just going to steal what he said: “Gold does not generate income, so when rates rise, it looks less attractive relative to bonds and cash.” Layer on top of that the fact that a lot of investors were sitting on substantial profits after gold peaked in January and suddenly needed liquidity to cover losses elsewhere.

It did recover somewhat during this week’s ceasefire relief rally, trading back up around the $4,700 mark on Thursday, though it pulled back again as doubts crept back in about whether the ceasefire would hold.

All right. That covers March in brief. Now, let’s talk about where we are right now.

The Ceasefire, and a Very Messy Week

A ceasefire announcement on Tuesday triggered an immediate turnaround in markets and a wave of optimism. S&P 500 futures surged nearly 2%, Nasdaq futures are up 2.2%, and WTI crude dropped 8% from its intraday high of $117, down to around $95. Brent crude fell over 15% from its peak to trough on the day, its biggest single-day drop in almost six years.

The S&P 500 extended its gain into a seventh straight winning session on Wednesday, the longest such run since October. But you’ll have to forgive me for being a bit skeptical about all this. Since the ceasefire was announced, a handful of cargo ships have passed through the Strait of Hormuz, but no oil tankers that aren’t owned by Iran. Both sides are still firing rockets, and neither side seems to have any public agreement on what the terms of the ceasefire are, or even who the ceasefire applies to.

Oil has been slowly creeping back towards that $100 mark as these doubts resurfaced, and equities are softening alongside it.

Negotiations today in Islamabad and any fallout across the weekend will tell us if this was a stepping stone to something more durable, or just another temporary pause before things kick off again.

What It All Means From Here

The market is essentially making a bet right now that the Islamabad talks produce meaningful progress and the Strait opens properly. That’s what its seven-session winning streak reflects.

But oil hasn’t fully believed it. WTI is still sitting near $98, well above pre-conflict levels, and the backwardation in the curve is telling us that the market expects disruption to persist for at least a few more weeks.

The CPI print due tonight is going to land right in the middle of all this uncertainty, and a hot number could complicate the relief narrative pretty quickly by forcing the rates discussion back to the front.

We’ve also got earnings season kicking off next week, and for the first time this cycle, companies will be talking on record about what six weeks of $100-plus oil has done to their cost base and their forward outlooks.

What’s perhaps most striking about all of this, though, is that despite everything, a month-long war, the biggest monthly oil spike since the ’70s, five straight weeks of equity losses, the S&P 500 has only dropped around 9% off its all-time high. The market came into this with a lot of momentum, and that’s held the floor. But it also means the market is priced for the Islamabad talks to go well. If they don’t, we’ll find out fairly quickly how thin that cushion actually is.

As always, the Chartist portfolios have regime filters and protective mechanisms built in to navigate exactly these kinds of environments, and many of those have kicked in across the last few weeks. Don’t forget though, even though some of our systematic portfolios are now in cash, members can still access Scott and Pete’s nightly in-depth chart reviews and trade recommendations through the chart research section.

Portfolio Performance: March

US Portfolios

• US Momentum Portfolio: –6.7% for March; +2.8% year to date
• Trade Long-Term Portfolio: +3.1% for March; +15.7% year to date. The weekly side exited mid-month, but the monthly portfolio remains invested through to at least the end of April.
• High Frequency Portfolio: Moved to cash after losses in the first half of the month; finished –6% for March, –2.3% year to date. It’s one of our more reactive strategies and has since re-entered the market at the start of this week.
• US All Weather Portfolio: –3.9% for the month, with gold and index positions sliding. Much of the damage was offset by its broader commodity holdings — oil, as you’d expect, doing a lot of the heavy lifting there.

ASX Portfolios

It’s worth noting that the materials sector was absolutely hammered — the ASX 200 Materials Index fell 14% across the month. I mentioned last month that most of the ASX’s recent momentum was coming from materials, and that unfortunately has not held through the month.

• ASX Momentum Portfolio: Carried most of its materials holdings from February; fell 14.9% for March, broadly in line with the sector; –5.5% year to date.
• ASX All Weather: Dragged down by falling gold values and the strengthening US dollar; –7% for the month, –6.5% year to date.
• Two Growth Portfolios: Similarly exposed to materials, fell 10.4% and 9.7% respectively. Both entered portfolio protect during the month and have since reopened.

All right, we’ll leave it there for now. It’s been a big month and a bloody long week. Stay safe out there, and if you’ve got any questions at all, feel free to reach out.