March was marked by the military conflict involving Iran, the United States, and Israel, along with the subsequent escalation of tensions across the region. In this environment, markets and corporate valuations fluctuated in response to headlines and political statements, while traditional economic fundamentals took a secondary role.
During the month, there was effectively no refuge from the decline in equities: neither fixed income nor gold managed to act as protective assets. The only three assets that delivered positive performance were the U.S. dollar, Bitcoin, and crude oil, with oil experiencing an especially sharp rally.
It is worth noting that crude oil remains an asset largely inaccessible to traditional investors due to the logistical complexities associated with physical storage and delivery.
Geographically, the most affected regions were Europe and, particularly, Asia — with India leading the declines. Both regions posted losses significantly larger than those seen in U.S. indices.
United States: Geopolitical Uncertainty and Energy Resilience
In the United States, the equity correction was relatively more contained because the country produces most of the energy it consumes domestically.
Additionally, the U.S. is positioned to benefit strategically from higher global oil prices by acting as an alternative energy supplier. This structural advantage helps explain why the increase in West Texas Intermediate (WTI) crude prices was more moderate compared to Brent crude.
Even so, the domestic impact was notable:
- Gasoline prices reached $4 per gallon, contributing to equity market declines of around 5%.
- The surge in oil prices reignited inflation fears, effectively eliminating expectations of interest rate cuts for 2026.
- As a consequence, U.S. Treasuries declined approximately 2.5% during the month.
Europe: Energy Vulnerability and Diplomatic Tensions
Beyond the energy shock itself, Europe became entangled in a complex diplomatic situation due to the volatility of President Trump’s foreign policy.
Although less than 1% of the oil transiting through the Strait of Hormuz is directed toward Europe, the region became trapped between its NATO commitments and its opposition to military escalation.
This created tensions with Washington following Trump’s criticism of Europe, which he described as a “one-way partner” after several countries refused to deploy naval forces to the Strait.
Within this environment of pressure:
- European equity indices declined between 8% and 10%.
- Fixed income markets fell between 1.7% and 3.8%, despite the ECB maintaining interest rates at 2%.
ECB President Christine Lagarde warned that the conflict increases uncertainty and revised the inflation forecast for 2026 upward from 1.9% to 2.6%.
She also stated that the ECB would not hesitate to raise rates even if the inflationary rebound proved temporary — a message that markets received negatively.
Asia: The Epicenter of the Energy Shock
Asia has been the region most exposed to the crisis, given that 87% of the crude oil and 86% of the liquefied natural gas consumed in the region transit through the Strait of Hormuz.
For countries such as China, India, Japan, and South Korea, dependence on this maritime route ranges between 40% and 80% of imports, representing an unprecedented structural vulnerability.
Markets reflected this deterioration through severe declines:
- China fell 7.7%.
- India declined nearly 15%.
- South Korea experienced the sharpest correction, with losses approaching 19%.
This market behavior is logical given that Asia concentrates the majority of global maritime traffic through Hormuz.
In response, governments implemented extraordinary emergency measures:
- Japan released strategic petroleum reserves.
- South Korea imposed price caps on natural gas.
- The Philippines declared a national energy emergency.
- China activated security protocols to guarantee energy supply and transportation stability.
Portfolio Implications
March was unquestionably a difficult month for investors.
The corrections not only erased the gains generated during January and February, but also pushed annual portfolio performance into negative territory regardless of risk profile.
The declines were broad-based and indiscriminate, with virtually no apparent safe haven.
It is essential to remember that markets periodically experience episodes of this nature — from the oil crisis of the 1970s to the tariff announcements of 2025.
Historically, time has rewarded investors who maintained discipline and stayed invested, while punishing those who sold during moments of panic, crystallizing losses and missing the subsequent recovery.
The strongest rebounds typically occur immediately after periods of maximum pessimism, and missing those recovery days has an irreversible impact on long-term returns.
From our perspective, while the conflict represents a tragic human event, economically it remains primarily “geopolitical noise” — a temporary shock that does not alter the structural pillars of the global economy.
Economic fundamentals remain solid:
- Corporate growth continues.
- Debt levels remain moderate.
- Global energy supply has not disappeared.
We believe that current valuations, particularly in Europe and Asia, reflect excessively pessimistic scenarios that are unlikely to persist over time.
As a result, we believe the current environment presents attractive entry points for investors with medium- and long-term horizons.
In uncertain environments, discipline and composure remain the pillars supporting successful investors.
We have not recommended altering portfolio allocations, as we do not believe this is the appropriate moment to do so.
Our view remains that the conflict should eventually stabilize, allowing markets to recover previous levels.
The current situation resembles last year’s tariff episode: initial declines followed by a moderation of tensions and a recovery that ultimately surpassed previous highs.
With U.S. Senate elections approaching and Republican popularity at historically weak levels, it is likely that hostilities will ease in the coming weeks — although, with the current occupant of the White House, a degree of unpredictability always remains.