Global markets faced immense uncertainty in March as slowing U.S. economic growth, the Iran war, and surging oil prices dampened investor sentiment. With fears of stagflation and financial stress resurfacing, markets declined for valid reasons.

The S&P 500-based exchange-traded fund State Street SPDR S&P 500 ETF Trust (SPY Quick QuoteSPY - Free Report) has lost 4.8% in Q1 2026 and is down 5.3% over the past month.

Against this backdrop, what should be your stance? Should they stay out of equities and wait for clearer signals on the war?

Let’s delve a little deeper.

An End to the War Soon?

In late March, there were signals that President Trump may end the Iran conflict even if the Strait of Hormuz stays largely closed, The Wall Street Journal reported, per Reuters, as quoted on Yahoo Finance.

Yet risks persist as Iran is likely to impose transit fees on vessels passing through the Strait of Hormuz and is reportedly encouraging Houthi attacks in the Red Sea. Moreover, a tanker attack near Dubai further indicates fragile diplomacy, per Bloomberg, as quoted on Yahoo Finance.

Elevated Oil Prices Helping S&P 500?

Uncertainty around oil prices is weighing on markets, but higher prices have improved the S&P 500’s energy sector’s earnings outlook (read: The Evolving Earnings Picture Amid Elevated Oil Prices).

The Zacks Energy sector is currently expected to enjoy +0.9% earnings growth in 2026 Q1, a material improvement from the -1.9% decline that was expected in early January. For full-year 2026, the expectation today is for +10% earnings growth, up from +5.4% earnings growth expected in early January.

While elevated oil prices are negative for the U.S. economy, stronger energy profits may partly offset weaker consumer spending.

Fed Commentary Eases Rate-Hike Concerns: Good News for Stocks

On the monetary policy front, Federal Reserve Chair Jerome Powell reassured markets that risks of contagion in the private credit market remain low. Powell indicated that inflation appears contained for now and the policy is “in a good place”, reducing fears of aggressive rate hikes.

A Rebound in Mag-7 on the Way?

Roundhill Magnificent Seven ETF (MAGS Quick QuoteMAGS - Free Report) has lost about 6% over the past month. A spike in treasury yields last month weighed on this high-growth space. However, easing yield concerns and de-escalation hopes on the Iran war could support a rebound in AI-driven tech stocks.

The ETF was up 4.6% yesterday. Even if the Strait of Hormuz remains shut partially, AI-driven tech stocks could rebound as bond yields decline.

Great Rebound in S&P 500 After Every Slump?

History suggests that market downturns are often followed by strong recoveries. After the Global Financial Crisis, the S&P 500 bottomed on March 6, 2009, at 666 and went on to deliver a 10-year annualized return of 17.8%, as quoted on CNBC.

Similarly, a decade after the Black Monday, the index posted annual gains of 17.2%, as quoted on the above-said CNBC article. These trend indicates the long-term resilience of the broader equity markets (read: Should You Be Greedy When Others are Fearful? ETFs in Focus)

Barclays Raised S&P 500 Target

Barclays recently raised its year-end 2026 S&P 500 target to 7,650, according to Reuters. The firm expects strong corporate earnings and economic resilience to offset macro risks such as geopolitical tensions, AI disruption, and stress in private credit markets (read: Can the S&P 500 Outrun a Looming Recession? ETFs to Navigate the Storm).