March was a month marked by geopolitical, macroeconomic, and monetary policy factors that have significantly reshaped the landscape of global financial markets. The factor that has dictated market direction throughout the month has been the military conflict between the United States, Israel, and Iran, which began in late February. The closure of the Strait of Hormuz beginning on March 4 disrupted approximately 20% of the global oil supply and significant volumes of liquefied natural gas, causing a disruption of historic proportions in energy markets. The scale of the situation is unprecedented in recent history: between March 3 and 20, the price of Brent crude climbed from $81.40 to $106.41 per barrel—a 30.7% increase in just three weeks—surpassing the $110 mark on multiple trading sessions. Volatility was extreme and two-way: following President Trump’s announcement regarding the postponement of attacks and the opening of negotiations with Iran, Brent fell nearly 11% in a single day, only to rebound again above $108 when Iran rejected the ceasefire proposal and presented its own conditions. At the close of March 31, WTI was trading at $101.38 per barrel, marking an increase of more than 50% since the start of the conflict.

This environment was the direct catalyst for the decline in equity markets. U.S. stock indices posted significant losses throughout the month, although there was marked divergence across sectors: the S&P 500 fell 5.09%, the Dow Jones 5.38%, and the Nasdaq 4.75%. Volatility was high: the VIX index averaged ~25.0 in March, compared to 16.1 in February. Overall, sector rotation was the most telling phenomenon of the period. The energy sector led the gains with a 10.31% increase; at the opposite end of the spectrum, the industrial sector was the worst performer, falling 8.54%, affected by rising fuel costs, deteriorating consumer confidence, and growing fears of a recession.

Turning to the fixed-income market, Treasury bonds saw a broad sell-off across the yield curve as investors revised their expectations for rate cuts downward. The yield on the 10-year Treasury note rose above 4.42%, its highest level since July 2025, while the 2-year yield surpassed 3.94%. These movements stem from expectations of persistent inflationary pressures in the medium term. The U.S. dollar, meanwhile, strengthened for most of the month amid demand for safe-haven assets, though it saw occasional pullbacks on days when diplomatic progress appeared to be made.

Regarding monetary policy, the Federal Reserve held its meeting on March 17 and 18, during which the Federal Open Market Committee (FOMC) decided to keep the federal funds rate unchanged at a range of 3.50%–3.75%. This was the second consecutive meeting in which officials kept the rate steady, after having cut it by 75 basis points during the second half of 2025. Jerome Powell noted that inflation remains above the 2% target, with inflation expectations rising in recent weeks in the wake of the conflict in the Middle East. However, the Fed maintained its projection of a 25-basis-point cut for this year.

Contrary to what one might expect in an environment of high risk aversion, gold behaved counterintuitively in March, falling 11.44% for the month and heading toward its worst monthly performance since October 2008. Bitcoin, for its part, also underperformed as a hedge during the month. Since its all-time high of $126,000 in October 2025, the cumulative correction has reached 45%, with Bitcoin trading around $68,200 at the end of March. Both gold and Bitcoin warrant close monitoring, as a potential shift in the Fed’s monetary policy or a de-escalation of the conflict could significantly revive their structural demand.

Finally, the domestic outlook was also affected by the global climate of uncertainty. Inflation in Mexico rose to an annual rate of 4.63% in the first half of March; the figure exceeded the consensus forecast of analysts surveyed by Bloomberg, who had anticipated 4.37%, and represented an increase from the 4.13% reported at the end of February. The increase was driven primarily by the non-core component, with fruit and vegetable prices surging 23% year-over-year. Despite this data, Banxico’s Governing Board made a split decision (3-2) on March 26, cutting the interbank interest rate by 25 basis points to 6.75%, surprising a segment of the market that had expected a pause in light of the inflationary spike and geopolitical uncertainty. Banxico’s forward guidance left open the possibility of a pause at the May meeting, suggesting that the institution will seek to calibrate its next move with more information on the inflation trajectory and its impact on the real economy. With this cut, the interest rate differential between Mexico and the United States narrows to 300 basis points, the lowest level since February 2016. Meanwhile, the Mexican peso closed the month at 17.93 pesos per dollar, a level similar to that at the start of the year.

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