Volatile Start to March as Iran Conflict Roils Markets, Tech Rebound Limits Damage

Stocks opened March with sharp intraday swings, as geopolitical shockwaves collided with resilient tech leadership. By the closing bell, however, the major averages masked much of the day’s turbulence. The S&P 500 finished flat, the Nasdaq Composite gained 0.4%, and the Dow Jones Industrial Average slipped 0.2%, despite a deeply negative start.

Markets opened under heavy pressure following a weekend escalation in the Middle East, including joint U.S. and Israeli strikes that reportedly targeted senior Iranian government and military leadership. Iran responded with retaliatory strikes across regional bases, sending crude oil sharply higher and disrupting global travel flows.

Energy stocks were the clearest beneficiaries. The energy sector rose 2.0%, the only S&P 500 sector solidly higher for much of the morning. Crude oil futures settled up 6.2% at $71.23 per barrel, and extended gains after the close following reports that Iran may target vessels traversing the Strait of Hormuz—an escalation with significant implications for global energy supply.

Defense-related names also rallied on the conflict backdrop. Aerospace and military contractors such as Axon Enterprise, Northrop Grumman, and RTX Corporation posted strong gains, helping lift the industrials sector 1.0% and pushing aerospace-focused ETFs sharply higher. The move offset weakness in airline stocks, including United Airlines and Delta Air Lines, which struggled under the weight of higher fuel costs and travel uncertainty.

Technology shares played a decisive role in stabilizing the broader market. The information technology sector rose 0.9%, rebounding from early losses as buyers stepped into large-cap names. Palantir Technologies stood out amid expectations of increased defense and intelligence spending. Software stocks broadly advanced, while Microsoft posted a solid gain.

NVIDIA was the day’s standout among mega-caps after reports that it plans to unveil a new AI-focused chip, helping the stock recover some of its recent post-earnings weakness and reinforcing optimism around AI infrastructure demand.

Elsewhere, the real estate sector edged higher, but seven other sectors closed in negative territory. Consumer discretionary stocks lagged, particularly travel-related companies. Norwegian Cruise Line was among the worst performers after missing revenue expectations and issuing cautious guidance, compounding pressure from rising energy prices.

Defensive sectors—consumer staples, health care, and utilities—also declined, as investors rotated back into growth and cyclical areas later in the session.

Small- and mid-cap stocks outperformed. The Russell 2000 and S&P MidCap 400 both recovered from early losses to finish higher, underscoring the market’s ability to absorb geopolitical shocks without broad capitulation.

From a macro standpoint, oil-driven inflation concerns moved back into focus. The ISM Manufacturing Index remained in expansion territory in February, but its Prices Index accelerated, reinforcing concerns that price pressures remain sticky. Combined with rising crude, the data pushed rate-cut expectations further out. According to CME FedWatch data, markets no longer assign at least 50% odds to a rate cut until the July FOMC meeting.

Still, commentary from policymakers and business leaders suggested the inflationary impact could remain contained if the Iran conflict does not escalate further. For now, the market’s ability to claw back early losses highlights a familiar 2026 theme: volatility is elevated, but underlying demand remains intact—particularly when tech leadership reasserts itself.

Our FTinvest 11 model portfolio slipped 0.06% to close at 1,011.05, marking another relatively flat session as the portfolio continues to trade in a narrow range. The index remains below its recent all-time high of 1,039.51, with momentum subdued following February’s volatility.

While short-term direction remains muted, FTinvest 11 continues to hold comfortably above the 1,000 milestone, preserving strong year-to-date gains. The portfolio’s value-oriented discipline remains intact as it navigates this period of consolidation at the start of March.