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The US-Iran conflict has caused oil prices to soar and potentially triggering a global economic recession March 10th,2026  Last week we outlined three potential outcomes for the Iran conflict—an upside case, moderate case, and a downside case. We are providing an updated scenario table below to provide more details on the impact to stocks. The upside case is defined by a quick end to military operations, with energy production and shipments normalizing and market pricing returning toward pre-conflict levels. In the moderate case, military operations continue for several weeks at reduced intensity before winding down. Oil prices may remain elevated, but there is no major disruption to global supplies. In that environment, risk aversion can stay higher for longer, and market leadership could remain with relative "safe-haven" assets and sectors with less exposure to energy costs. U.S. equities may outperform Europe and Asia-Pacific on a relative basis, while energy and defense-related areas tend to hold up better than energy-sensitive industries such as airlines and transportation. We view the upside and moderate scenarios as the most likely scenarios. The downside case presents risk to portfolios with a prolonged conflict disrupting global energy supplies and pushing oil prices sharply higher for a sustained period. That would raise recession risk by squeezing household purchasing power and corporate margins while also lifting inflation, which is a particularly difficult mix for policymakers to respond to. In this scenario, the potential for deeper and more persistent drawdowns in global equities increases, more so for international stocks than U.S. stocks. |
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