Weekly Investment Update (04/03/2026)

Developments in the Middle East continue to unfold, and steady newsflow, despite limited incremental clarity, continues to shape market sentiment. Ultimately, U.S. equities finished the week higher, supported by early-week optimism that de-escalation could come sooner rather than later. The tone shifted modestly following President Trump’s Wednesday night address, in which he indicated the conflict could continue for two to three more weeks, even as U.S. objectives appear to have been largely achieved.

Focus remains on energy supply, and traffic through the Strait of Hormuz remains suppressed. That said, there are moderate signs of increased activity as markets weigh the balance between inflation and growth risks alongside possible de-escalation. Still, ongoing labor market resilience continues to support the underlying economic backdrop, and a stronger-than-expected March nonfarm payrolls report provided additional evidence that the U.S. economy entered this period of uncertainty from a position of resilience.

In this environment, we remain disciplined and focused on broader fundamentals rather than reacting to headlines. Although geopolitical uncertainty may persist in the near term, U.S. economic resilience relative to the rest of the world continues to provide a buffer.

Restoring Strait of Hormuz Traffic Is Key to Lowering Energy Prices

What is happening: The Strait of Hormuz, which normally carries about one-fifth of the world’s energy supplies, has been severely disrupted since the conflict in the Middle East began. Following the bombing of Iran on February 28, energy flows through the strait fell sharply. In the entire month of March, only 188 ship transits were recorded, compared with approximately 135 per day before the conflict. Of the limited traffic that continues to pass through, about 70% is linked to Iran. Tehran also appears to be exercising tight control over which vessels are allowed to pass.

However, there are modest signs of improvement. Last week, 48 vessels transited the chokepoint, up from 34 the previous week and the highest weekly figure since the war began. Even so, traffic remains about 90% below normal levels. These recent movements support Iran’s claim that the strait remains open for business, though only for ships it permits to pass. Importantly, passage through the Strait remains possible. A complete shutdown of the strait would also cut off Tehran’s own trade routes and a key source of income.

Why it matters: The Strait of Hormuz is a price-setting chokepoint for global energy, so even a partial or temporary disruption can have significant effects on oil and gas prices. In the early stages of conflict, markets focused mainly on the inflationary impact of higher energy costs. Five weeks on, with traffic still severely disrupted, the risks to economic growth from sustained high oil prices are increasing.

The longer the strait remains impaired, the greater the chance of supply shortages, particularly as alternative routes, including Saudi exports via the Red Sea, can provide only limited relief. Any U.S. ground operation would likely raise the risk of a renewed halt in traffic, either because Iran chooses to close the route to intensify economic pressure, or military activity makes transit too dangerous.

Bessemer’s view remains that the conflict is likely to follow the familiar geopolitical pattern, triggering a sharp but ultimately temporary spike in energy prices. Even so, the conflict has already lasted longer than many expected, and its economic effects are likely to be felt more acutely outside the U.S., where countries are more dependent on energy shipments from the Middle East. The longer the disruption persists, the more serious the consequences for global growth and investor sentiment.

U.S. equities, where in certain strategies Bessemer continues to hold an overweight position relative to the applicable benchmark, have shown greater resilience since the conflict began, supported by the country’s relative energy independence, largely from shale gas, and by the safe-haven status of the U.S. dollar. For further discussion of the economic effects of the conflict, please see our recently published article “Oil Shock in Five Pictures: How Resilient Is the U.S. Economy.”

Labor Market Resilience Reinforces Fed Patience Across Its Dual Mandate

What is happening: This week’s jobs data continues to indicate a gradually cooling but very resilient U.S. labor market. JOLTS job openings for February met expectations of 6.9 million, although they were down from the previous month’s 7.2 million. Total hirings were down to 4.8 million while total separations were largely unchanged at 5.0 million. The nonfarm payrolls report for March showed an even stronger beat, with 178,000 net jobs additions versus a consensus estimate of 59,000. This stands in contrast to February’s net loss of 133,000 jobs. The unemployment rate fell to 4.3%, but it was partially helped by the labor force participation rate dropping to 61.9%.

Why it matters: This week’s jobs data reinforce our view that the labor market is gradually cooling but not collapsing. The slight decline in hiring with separations holding steady suggests labor demand is softening not through mass layoffs, but through employer caution and fewer new opportunities. Friday’s nonfarm payroll report was especially important because it showed that February’s 133,000 net loss was a one-off distortion rather than a more persistent downshift. In particular, it highlighted the impact of the now resolved Kaiser Permanente strike on the aggregate numbers. Healthcare workers reduced February’s total by 28,000 net jobs when the strike occurred and have now bounced back in March with a net gain of 76,000 jobs.

For Fed policy, softer hiring and weaker labor demand are developments that would normally support policy easing over time. However, the Fed has just said it is watching labor-market conditions alongside inflation. At the moment, labor market conditions seem more consistent with the Fed’s staying patient. Looking forward to later in the year, we continue to believe that rate cuts are more likely than rate hikes. Any oil shock strong enough to cause concerns about persistently high inflation will likely also place significant downward pressure on economic growth and labor market expectations. Moreover, historically the Fed has often cut interest rates in response to oil-price-driven recessions, although a recession is not our base case expectation.

The timing of the data releases is also important. The February JOLTS report reflects pre-war labor demand, and therefore only showed what the labor market looked like before the latest geopolitical conflict between the U.S. and Iran. In contrast, the March nonfarm payrolls report includes time periods following the start of conflict and captures at least some of the war’s early effects on business hiring behavior. The ultimate duration of the conflict is likely to impact jobs data over the upcoming months, and we will continue to closely monitor the situation.