Why this energy shock might be different

What kind of long-term impact will the Iran conflict have on oil and natural gas prices?

Market recap

• Equity markets slumped again this week as the conflict in Iran continues to weigh on sentiment and create uncertainty over growth, inflation and interest rates.
• The S&P 500 fell 1.9%, with gains in energy and banks offset by weakness across the rest of the spectrum.
• The index has now broken below its 200-day moving average for the first time since the height of tariff concerns early last year.

Energy

Strikes by Israel on Iranian gas fields last week seemingly raised the stakes of the U.S.-led conflict to a new level—and threw the longer-term outlook for oil and natural gas into question. Our evaluation is that this crisis isn’t behaving like other recent geopolitical flare-ups, which have tended to cause only short-term spikes in energy prices. Rather, we expect higher oil prices to persist for some time. Will oil stay above US$100 per barrel for the entire year? That remains to be seen. But prices in that range do seem likely to persist in the near term. Those higher prices are likely to have a range of knock-on effects, including on supply, consumer sentiment and spending, and the input costs for any industry reliant on oil. Together, these factors are why we downgraded our Equities score to +1 (slightly bullish) from +2 (bullish) this month. Overall, the ramifications of the Iran conflict for energy markets are playing out about as we’d expected, and somewhat worse than the general consensus. While we are slightly more bullish on oil and natural gas in the near term than we had been previously, it is a difficult trade to play, because the situation can change overnight. So far, we haven’t made any moves in our portfolios regarding the oil sector —but that could change.

Bottom line: With oil and natural gas, we think the wisest course is to exercise caution and wait to see how the Iran conflict continues to play out.

The Fed

Last week, the U.S. Federal Reserve opted to hold interest rates steady. However, arguably the most significant news of the week came from Jerome Powell himself, as the Fed Chair vowed to stay in his current position until the Justice Department’s investigation into his conduct has been fully resolved. This raises the possibility that Powell could stay on as Fed Chair for some time, since Donald Trump’s hand-picked replacement for the position, Kevin Warsh, is not likely to be confirmed by the Senate until the investigation is over.¹ In terms of the interest rate outlook, our view is that markets should take the question of who will be the next Fed chair out of the equation. The math hasn’t changed—the Fed chair doesn’t make decisions on their own, and there’s currently a balance between the doves and hawks on the policy-setting Federal Open Market Committee (FOMC). If Trump replaces a dove with a dove, it doesn’t do anything, and even if he replaces a hawk with a dove, that would only switch one vote. The data also indicates that another rate cut is not a slam dunk, especially in light of rising oil prices stemming from the Iran conflict. Speculation around the Powell investigation and the timing of Warsh’s ascension to the Fed do create uncertainty, but markets nonetheless expect a rate cut later this year. If the data trends continue, the market’s expectations will likely move closer to the Fed’s expectations. That’s probably a good thing for investors, as it reduces the chances of major surprises.

Bottom line: While the future composition of the Fed has become a guessing game, one new person—even a new Chair—is not likely to change the FOMC’s entire disposition.

Earnings

While most market leaders will not report their Q1 results until April or May, there was nonetheless some potentially major earnings news last week, as the Wall Street Journal reported that the U.S. Securities and Exchange Commission (SEC) is preparing a proposal to eliminate quarterly reporting requirements.² The end of quarterly reporting would mean the end of forward guidance and regular insights into how companies are doing. That said, investors who physically go to meet with C-suite executives—as we do—should be fine, because they’ll still be getting insights that they can piece together into a fairly complete picture. Given the information gap, good fundamental investors are likely to fair better than short-term traders. Earnings season may mean a little less, and given markets’ propensity to move on forward guidance, we may see a little less turnover. I also wonder whether the lengthier gap between earnings reports will cause investors to wait longer to buy stocks. Overall, public companies would feel more like private market firms, and would have more runway to implement their visions, execute, and show results. (This, incidentally, is one of the reasons why many companies are choosing to stay private.) In the longer term, that could mean a higher potential for returns since companies won’t have to satisfy the market’s whims every quarter.

Bottom line: While the elimination of quarterly reporting would be a significant change, it could mean higher returns in the long term, with strong fundamental investors best positioned to capitalize.

Positioning

For a detailed breakdown of our portfolio positioning, check out the latest BMO GAM House View Report, titled Pricing in geopolitical risk: Oil, inflation and the cycle’s next phase .

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Originally Posted March 23, 2026 – Why this energy shock might be different

Source

¹Michael S. Derby, “Fed’s Powell confirms Trump is stuck with him until DOJ probe is ‘well and truly’ over,” Reuters, March 18, 2026. 

²Corrie Driebusch, “SEC Prepares Proposal to Eliminate Quarterly Reporting Requirement,” The Wall Street Journal, March 16, 2026.