Q1 Was a Strait Mess, and Wall Street’s Hangover Is Just Getting Started
The market’s grades are in, and parent-teacher conferences won’t be pretty. This Q1, the S&P 500 fell 4.6% — its weakest showing since 2022, as Iran’s effective closure of the Strait of Hormuz pushed crude past $100 and tightened pressure across markets. Tech was already slipping from the AI scare trade, and the geopolitical shock finished the job.
- The AI unwind hit hard — the Magnificent Seven ETF fell 12.2% this first quarter and the iShares Expanded Tech-Software ETF plunged over 24%.
- Losses spread across markets, with financials down 9.8%, consumer discretionary and tech off 9%+, while the Cboe Volatility Index jumped ~69%.
The strait is the gate: Nationwide’s Mark Hackett says the market is “locked in on the Iran conflict,” and high oil prices are making any durable recovery harder as inflation picks back up and limits the Fed’s room to cut. Keith Lerner at Truist adds that markets are “starting to price in maybe stagflation-lite,” while Wells Fargo’s Scott Wren puts it simply, “Everything depends on the Strait being open.” Until that chokepoint clears, every rally risks being a head fake.
