March 2026 index market overview: energy shocks and shifting trade policy

Global supply deficits and the Persian Gulf 

The primary driver of market volatility is the ongoing disruption in the Persian Gulf. The closure of the Straits of Hormuz has reduced global crude oil supply by approximately 11 million barrels per day. While global inventories can cover temporary deficits, a prolonged blockade threatens more than just oil; it impacts Liquefied Natural Gas (LNG), distillates, and synthetic fertilizers. 

• Supply shortfall: The market faces a massive deficit, which could balloon to 19.5 million barrels per day if additional pipelines in Saudi Arabia and the UAE are compromised. 
• LNG impact: Roughly 20% of global LNG supply passes through the Straits. Qatar has already declared Force Majeure, forcing buyers into a very tight spot market. 

US indices: testing critical support 

US bourses have faced a broad-based decline this month. Investors are grappling with high policy uncertainty, which has surged to a rating of 369 under the Trump Administration, up from 130 during the Biden Administration. 

• S&P 500: The index closed at 6,632, down 2.9% MoM. It is currently testing its 200- day moving average of 6,604, while the VIX has surged to 27.2%. 
• Nasdaq: Showing more resilience but still down 1.2% MoM at 24,381. 
• Dow Jones: Hit much harder with a 7.0% MoM drop, closing at 46,559. 

Beyond energy, US markets face fiscal uncertainty following the replacement of previous tariffs with an across-the-board 10% tariff under Section 122 of the Trade Act. 

European markets: a tale of two indices 

The impact of the energy shock varies across European borders, depending largely on sectoral exposure. 

FTSE 100: The energy and defense cushion 

The FTSE 100 has been relatively insulated, down 1.4% MoM. This stability is attributed to its heavy weighting in: 

• Energy: Shell and BP have seen gains of 17.2% and 15.9% respectively. 
• Defense: BAE Systems also rose 17.2% amid the current climate. 

DAX 40: Vulnerable to price shocks 

Conversely, Germany’s DAX 40 slumped 5.7% MoM to 23,447. The index is particularly sensitive to global risk appetite and faces a "serious price shock" due to its reliance on natural gas and oil imports. While earnings per share had shown a recovery of 6.7% Year over-Year (YoY), the energy crisis now threatens to depress corporate margins. 

Looking ahead: Credit risks and valuation 

While corporate earnings growth remains robust—with the S&P 500 expecting 15.3% forward EPS growth—valuation concerns are being replaced by credit concerns. The Bank of America BBB credit index is climbing rapidly, suggesting that if credit risk continues to rise, stock valuations could see a further downward skew. 

Market note: Investor sentiment has deteriorated. Recent AAII Survey data shows that net 14.5% of respondents are now bearish on stocks. 

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