Weekly Market Watch

The Financial Market Fog of War

Conflict in the Middle East shaped global financial market performance last week as investors grappled with heightened uncertainty. Non-U.S. equities and gold—market leaders earlier this year—lagged during the week; while energy markets delivered the largest positive returns and oil prices experienced their largest weekly jump since April 2020. The MSCI Emerging Markets Index had its largest weekly decline since March 2020, led lower by the significant volatility of equities in South Korea, which experienced their worst day on record followed by their second best. U.S. large-capitalization stocks outperformed most other equity markets on a relative basis, as the beleaguered software industry had its best week in nearly a year. We expect heightened market volatility to continue alongside daily developments in the conflict in the Middle East.

Market Outlook

Despite short-term uncertainty regarding the conflict in the Middle East, we continue to favor equities in 2026 as our underlying expectations for economic growth and policy adjustments for both domestic and international equities remain constructive. We continue to believe that productivity enhancements from artificial intelligence will serve as a tailwind for global equities, specifically U.S. companies, in 2026.

Chart of the Week

Geopolitical events have historically had a relatively muted impact on U.S. equity returns over the long term.

However, conflicts that involve shocks to oil production have the potential for greater impacts to the price of oil globally.

We encourage investors to stay fully invested, and to look for opportunities to rebalance in periods of elevated market volatility.

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For definitions of indexes used in this publication, please refer to pnc.com/indexdefinitions.

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