Iran War, Soft Econ Data, Inflation Fear Stymie Market Comeback: March 13, 2026

Markets attempted a comeback this morning even as there were no signs of an end to the Iran war and crude oil prices lingered above $97. Economic data was largely negative, too, with a downward revision to fourth-quarter GDP, sticky PCE inflation, weakening UMich sentiment and lighter-than-expected durable goods orders. Job openings bucked the trend, posting a sharp increase that beat expectations and indicated that labor demand is improving. Both stocks and Treasuries have swung from modest losses to marginal gains several times already, but equity investors are favoring the defensive characteristics of the healthcare, utilities and consumer staples sectors while also scooping up financials and real estate. Additionally, the greenback is catching bids, although non-energy commodities are being slammed on fading rate cut optimism. Indeed, fixed-income observers have raised the odds of no Fed reductions this year to 40%. Meanwhile, participants, after assessing this morning’s data, fear that economic conditions may have begun softening even before the Middle East conflict started, which is weighing on buying appetites throughout Wall Street.

GDP Revised Downward

The longest government shutdown in history hurt economic growth much more than anticipated in this morning’s revision to performance in the fourth quarter of 2025. The first look at gross domestic product (GDP) of 1.4% was downwardly adjusted to 0.7% as consumer spending, business investment, net exports and government expenditures came in lower than originally perceived.

Gas Prices Hurt Consumer Sentiment

The Iran War negatively impacted consumer sentiment this month as households have become worried that higher costs at the pump will worsen affordability pressures. The University of Michigan’s (UMich) gauge came in at 55.5, its lowest result of the year. Still, it arrived ahead of the anticipated 55 but below February’s 56.6. Despite the index for current conditions expanding from 56.6 to 57.8, the indicator concerning future expectations bogged down the headline. It dropped from 56.6 to 54.1. Survey respondents mentioned gasoline charges as a top headwind.

Job Openings Point to Improving Labor Market

January job openings rose to 6.946 million, ahead of the median forecast calling for 6.7 million and December’s 6.55 million. The sectors with the largest degree of vacancies were finance, healthcare/social assistance and retail trade, which saw increases of 184k,150k and 130k; however, professional/business services, other services and private education experienced declines of 190k, 35k and 28k.

Pain at the Pump and In Portfolios Is Awful For GDP, Earnings

Stocks are hovering near year-to-date lows as investors grow increasingly concerned that consumer spending may weaken significantly if the war doesn’t end soon. Wealthy households have been bolstered by buoyant capital markets while softening inflation, subdued unemployment and paycheck expansions have supported the lower- and middle-income cohorts. But now, with equity momentum taking a dive and pain at the pump hampering shopper capacity, there’s a chance that personal expenditures could start to become a major headwind for the pace of GDP and corporate earnings. The adverse portfolio effects and surge in energy costs could materially slow the cycle’s progression, keeping activity well below potential while substantially raising slowdown risk.

International Roundup

UK GDP Growth Underperforms

The UK economy underperformed expectations in January with gross domestic product climbing 0.8% year over year (y/y) and producing no growth relative to December, according to a preliminary estimate from Office for National Statistics. Economists anticipated y/y and month-over-month (m/m) results of 0.9% and 0.2% following December’s 0.7% and 0.1% northward movements. In January, economic activity in the administration and support services contracted slightly more than 0.1%. Other sectors that slipped, albeit at lower rates, included transportation and storage, accommodation and food services and real estate activities. Growth was supported by the wholesale and retail trade category, information and communication, public administration and defense, professional scientific and technical activities, education and the human health and social work activities group.

Various broad components of the GDP report produced the following results:

• Construction output, which was 0.2% above December’s level. It exceeded the economist consensus estimate for no growth and strengthened considerably from the prior months 0.5% dive. Relative to the year-ago period, however, construction output was down 0.2%, a worse showing than the 0.1% contraction anticipated by economists but slightly better than the 0.3% slip in the preceding month.
• Industrial production fell 0.1% m/m. It trailed the economist consensus estimate for a 0.3% ascent following December’s 0.9% contraction. The metric was up 0.4% y/y, a weaker result than the 0.6% expectation and December’s 0.5% print.
• Manufacturing production was up 0.1% m/m and 1.3% y/y. Economists anticipated 0.2% m/m and 1.5% y/y expansions following the 0.5% m/m decline and 0.5% y/y climb in the preceding period.

While Goods Trade Deficit Falls

The UK’s goods trade deficit eased from £20.1 billion in December to £17.8 in January with imports dropping 0.6% and exports climbing 6.7%. During the first month of 2026, exports to non-EU countries were up 7.1% while the value of shipments to the EU expanded by 6.2%. Exports to the US tanked 11.3% with softer shipments of cars providing the strongest headwind. Imports of US products, conversely, jumped 12.4%, a result of increased purchases of aircraft and metals. 

Industrial Production Falls in Europe

Industrial production in the euro area sank 1.2% y/y and 1.5% m/m, significantly missing expectations for 1.4% and 0.6% gains. The print was also a strong reversal from the y/y growth of 2.2% in December and an acceleration of the preceding month’s 0.6% m/m fall.

Relative to December, production of intermediate goods, capital goods, durable consumer goods, and non-durable consumer goods headed south by 1.9%, 2.3%, 1.9% and 6%. Energy, however, was up 4.7%.