Iraq declared force majeure on oilfields operated by foreign companies this week, and drones struck two refineries in Kuwait. Crude spiked to $112 a barrel and markets sold off hard. The Dow is now on pace for its worst month since 2022. Here's what's actually happening — and what long-term investors should do about it.
As of March 20, 2026, the damage is significant:
The Russell 2000 — which tracks small-cap U.S. companies — is now down more than 10% from its recent highs, putting it in official correction territory. The Dow is on pace to close out March with a 5%+ monthly decline, its worst since 2022.
This is exactly the kind of event that causes investors to panic-sell — and historically, it's also the kind of event that long-term investors look back on as a buying opportunity.
The immediate trigger is geopolitical: escalating conflict in the Middle East has disrupted oil supply chains. Iraq's force majeure declaration and the Kuwait refinery strikes have traders pricing in potential supply disruptions to a market that was already tight. Brent crude at $112 a barrel is meaningfully above where it was trading even a month ago.
The deeper problem is what $112 oil means for inflation. The Federal Reserve just held rates steady at 3.5%–3.75% this past Tuesday (March 18), citing elevated inflation concerns. Policymakers already forecast only one rate cut in 2026. A sustained oil price spike makes that one cut less certain — and pushes the Fed's 2% inflation target even further away.
Add to this the ongoing tariff uncertainty. The Supreme Court ruled in February that the President cannot use IEEPA to impose broad tariffs, but the administration enacted 25% tariffs on Canada and Mexico anyway in early March and doubled China tariffs to 20%. A one-month USMCA reprieve expires April 2. Markets hate uncertainty, and right now there is plenty of it.
Not all stocks move the same way in an oil spike:
J.P. Morgan Global Research has put the probability of a U.S. and global recession in 2026 at 35% — elevated, but not a majority view. The risks cited include sustained high oil prices feeding inflation, tariff-driven supply chain disruptions weighing on business sentiment, and slowing consumer spending. This is not a prediction of a recession, but it's a serious flag worth noting.
A 35% recession probability means there's a 65% probability there won't be one. Adjusting your entire portfolio for a scenario that's more likely not to happen is usually the wrong move.
The temptation in weeks like this is to move to cash, wait for the bottom, and buy back in when things settle. This strategy sounds logical and almost never works in practice. You have to be right twice — when to get out and when to get back in — and most investors miss the recovery entirely.
Here's what actually makes sense right now:
Volatile weeks feel terrible in the moment and are largely irrelevant over a 10–20 year investing horizon. The investors who build real wealth are the ones who keep contributing consistently through exactly these kinds of events. Noise is not strategy.
See how consistent monthly investing builds wealth even through volatile markets —
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