This week it was a combination of the war with Iran and a surprisingly weak jobs report that pushed stocks lower. The price of oil surged roughly 35% this week, one of the largest moves in futures markets going back to the early 1980s. Traders are now pricing in the possibility of a drawn-out conflict. A good comparison is the 2022 Russian invasion of Ukraine, when oil initially surged nearly 50% before eventually falling from around $130 to near $50 a few years later. These spikes tend to be temporary, but the timing is impossible to predict.

There will likely be a short-term shortage of oil because of supply disruptions, but that does not necessarily make oil a long-term investment. If anything, when this war eventually ends, oil could become a short. Prices could fall as quickly as they rose once tensions ease. In the meantime, it would not be surprising to see oil move well above $100.

The weak jobs report appears more structural. U.S. payrolls unexpectedly fell by 92,000 in February and prior months were revised lower. Headlines about layoffs have been building for months, so it is always somewhat surprising how shocked markets are when the data finally reflects those trends. It is also worth remembering that employment data is often revised significantly. In early 2025, job growth was revised lower by more than 1.2 million positions for 2024 and early 2025.

This raises an obvious question: are companies cutting jobs and reducing hiring, or are we beginning to see the early effects of AI replacing certain roles? The reality is it is likely a combination of both.

Markets rarely move lower because of just one event. It is usually a series of pressures building at the same time, and that is what we saw this week. I do not anticipate the jobs market improving quickly. Companies are realizing they can operate more efficiently with automation, and once those decisions are made they tend to become permanent. Many of the losses will likely occur in warehouses and entry-level positions that can be automated.

At the same time, the war with Iran has created a new source of volatility. The closure of the Strait of Hormuz pushed oil prices higher and reignited inflation fears. Oil-sensitive sectors like airlines and transportation were hit hard as investors priced in higher fuel costs. The airline ETF, U.S. Global Jets, fell nearly 11% this week and is down about 19% for the 1-month. When jet fuel prices surge, it can wipe out most of the industry’s profits for the year. Airline margins are already thin, and executives are already discussing the possibility of raising ticket prices.

This puts the Federal Reserve in a difficult position. Weak employment data would normally push the Fed toward cutting interest rates, but rising oil prices create inflation pressure that could make them hesitant. In my view, the Fed will ultimately have to look through the temporary spike in oil prices. The imbalance is being caused by a geopolitical disruption rather than structural demand. The United States now produces far more energy than it did in the past, and strategic reserves can always be released if necessary.

Once this conflict eventually ends, the focus will likely shift back to the structural changes taking place in the economy, particularly the impact of artificial intelligence on productivity and employment. Companies across multiple industries are investing heavily in automation. The largest technology firms alone are expected to spend close to $700 billion in 2026 on data centers and AI infrastructure. With that level of investment, the real question is not where the technology stands today, but where it will be in a few years.

There were also signs this week of how quickly sentiment around AI can shift. Travel stocks rallied sharply on Thursday. Expedia jumped roughly 12% to 13% and Booking Holdings rose more than 8% after news that OpenAI would scale back plans to enable direct checkouts inside ChatGPT, instead directing transactions through integrated third-party applications. Investors had feared that AI companies would bypass existing platforms entirely. When that fear faded, the stocks bounced quickly.

Software companies experienced something similar. After a sharp selloff triggered by Anthropic’s launch of Claude Cowork plugins designed to automate specific professional tasks, many software stocks stabilized. Investors began to realize that these tools are designed to automate targeted workflows rather than replace entire software ecosystems. That helped end one of the sharpest repricings I have seen hit the sector in quite some time.

As for the war itself, Iran’s missile launches have reportedly declined significantly and their weapons stockpile has been heavily depleted by U.S. and Israeli strikes. That increases the odds of some form of surrender or ceasefire, although the risk of internal unrest remains. For now, the primary transmission mechanism to markets has been oil prices. Higher oil is Iran’s most powerful lever. If energy prices surge, global support for the conflict could weaken as economic pressure builds. If oil prices begin to fall, Iran would lose much of that leverage.

In some ways, this reset may actually leave the market in a healthier position. Prior to the correction, several parts of the market had become stretched. It often takes a shock to bring those imbalances back into line. Sometimes prices overshoot in the process, and we may be seeing that in certain industries now. Going forward, the market will likely move more in unison rather than through sector rotations. That is typical during geopolitical events when correlations rise and volatility increases.

If tensions in the Middle East begin to ease and oil prices stabilize, volatility could decline just as quickly as it appeared. Investors are not there yet, but the situation is evolving rapidly and markets will continue reacting to each new development. Periods like this are uncomfortable, but they are also when long-term opportunities begin to form as fear temporarily pushes prices away from fundamentals.

* U.S. Bureau of Labor Statistics: February payrolls fell by 92,000; historical revision of 1.2 million jobs in early 2025.

* Federal Reserve Bank of Atlanta: GDPNow Forecast Update (March 2026).

* U.S. Energy Information Administration: Oil price surge of 35% this week; Strait of Hormuz closure data.

* International Energy Agency: Global Oil Supply Outlook.

* Bloomberg Intelligence: Airline and Transportation Sector Analysis; ETF (U.S. Global Jets) performance.

* Morgan Stanley Research: The Impact of Generative AI on Enterprise Software.

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