Note: This panel took place on Tuesday, March 10, 2026.
How is the conflict in the Middle East changing the outlook for energy markets?
Helima Croft: The key question is how the U.S. administration defines success. It has laid out so many criteria for declaring the conflict done that it could potentially choose one and say it's over from its standpoint. But the Iranians have a voice, and they can continue the conflict through asymmetric means – drone capabilities, small boats laden with explosives and mines. They also have proxies that could extend this beyond Washington's desire to off-ramp it.
When I talk to people I know in Washington, they say the initial military objectives – centered around the missiles, launchers and formal naval assets – could potentially be achieved in about two to two and a half weeks. But the losses in terms of oil production are already mounting. We now have 6.7 million barrels a day across the Middle East shut in, because if volumes cannot move through the Strait of Hormuz, countries simply have to shut in production.
With Russia-Ukraine, the head of the International Energy Agency warned of a three-million-barrel-a-day disruption. What we now have is a physical disruption that is more than double the fear of disruption we saw with Russia-Ukraine.
The administration has every incentive, because of retail gasoline prices and the midterms, to try to bring this war to an end. The optimistic expectation is that it could be wrapped up in about two weeks. It becomes much more challenging if it goes beyond that.
"We now have a physical disruption that is more than double the fear of disruption we saw with Russia-Ukraine."
Helima Croft, Global Head of Commodity Strategy and MENA Research, RBC Capital Markets
How does a higher oil price affect the economic outlook?
Frances Donald: Economists will generally tell you the same thing about oil shocks because we have seen this before. There are a few stylized facts. On balance, very few will change their medium-term GDP forecast on aggregate, because a drop in consumption is often largely offset by an increase in investment over time. The consumption profile tends to weaken first, then investment picks up. On balance, the rule of thumb is that the net impact is close to zero – but that hides significant disruption underneath.
Where the impact becomes more visible is in inflation. We have been in the camp that inflation would run around ~3% percent this year. But if oil moves to $100, that pushes CPI closer to 3.5%, which becomes more problematic.
The bigger question is how this affects the consumer. The consumer is not in the same position as during Russia-Ukraine. Savings are depleted. Job growth is close to zero.
There has really only been one area where U.S. consumers have seen any relief in the past few years, and that has been gasoline. Food, electricity, childcare, beef and coffee have all risen significantly, up more than 30 percent over the past five years. Gasoline has been the exception.
So what I am watching is not whether GDP or inflation forecasts change immediately. It is how consumers react if the one price that has helped keep affordability somewhat in check starts moving higher again.
Why have equity markets remained relatively resilient?
Lori Calvasina: Earlier this year we saw a fierce rotation out of the U.S., driven in part by AI jitters and concerns around private credit. What surprised us was how far valuations had already adjusted. The U.S. versus non-U.S. valuation ratio moved well below the post-Covid average and close to the 20-year average.
So by the time this crisis emerged, the U.S. market had effectively opened up a valuation opportunity, and suddenly it began to look like the safe haven again. Concerns around private credit and AI moved to the back burner. The dollar rallied and money started flowing back into U.S. equities.
We surveyed our analysts using a $100-for-longer oil scenario, asking them to assume the conflict lasted more than four weeks. Outside the energy sector, most analysts said the impact would be minimal – either none, a little, or mixed. That does not mean the insulation will prove real, but right now that is where a lot of bottom-up investors are positioned. In that sense, the U.S. market is benefiting from the defensive trade.
Where we do see the impact more clearly is in valuations. When Frances's team stress-tested inflation assumptions tied to $100 oil, we fed those numbers into one of our models. Higher inflation and higher yields reduced the price-earnings multiple significantly, bringing our S&P scenarios down to roughly 6600 to 6900, depending on the earnings assumptions.
When geopolitical risk spikes, median PEs tend to compress. So the impact may not show up through earnings – it may show up through the multiple investors are willing to pay.
"When geopolitical risk spikes, median PEs tend to compress. So the impact may show up through the multiple investors are willing to pay."
Lori Calvasina, Head of U.S. Equity Strategy, RBC Capital Markets
What should investors keep in view beyond the immediate shock?
Helima Croft: Part of the downward pressure on prices earlier was the assumption that there might be a coordinated strategic stockpile release of 300 to 400 million barrels, alongside comments suggesting the conflict could end soon. But that is a short-term tool.
The United States has not meaningfully replenished the Strategic Petroleum Reserve. Multiple administrations chose not to rebuild it when prices were lower.
If the disruption persists, we could be looking at the biggest energy shock since the 1970s, and potentially one that exceeds it. And it's not just oil – it's fertilizer, natural gas flows from Qatar and everything that moves through the Strait of Hormuz. If this becomes a medium-term supply shock, the real question will be what it changes in terms of government policy and long-term energy strategy.
"If this becomes a medium-term supply shock, the question is what it changes in terms of government policy."
Helima Croft, Head of Global Commodity Strategy and MENA Research, RBC Capital Markets
Frances Donald: Let me add a dose of sunshine. Before last week, there was still an economy operating underneath all of this. We are layering a shock on top of an existing set of dynamics.
An oil shock is clearly negative. It is stagflationary for consumers and particularly difficult for lower-income households. It depletes savings and increases reliance on credit.
But at the same time we have a government deficit running around six to seven percent of GDP, roughly 20% of incomes coming from Washington, and large amounts of AI-related capital investment already underway. Those forces provide meaningful support to the economy.
So the shock cannot be viewed in isolation. Investors need to recognize that longer-term structural forces remain in place even while markets react to the latest headlines.
"The shock cannot be viewed in isolation. Investors need to recognize that longer-term structural forces remain in place even while markets react to the latest headlines."
Frances Donald, RBC Chief Economist
Lori Calvasina: What concerns me most right now is not my 12-month S&P 500 forecast. It is watching the signals that historically help identify market bottoms.
Our job is to focus on the data and the signals that tell us when sentiment has become so negative that it is time to start looking past the shock.
Time horizons matter. Scenarios matter. What happens beneath the surface of the economy matters. Certain sectors and certain households will feel these shocks more acutely than others.
Those are the dynamics investors should watch as they navigate the day-to-day flow of news.
