Oil shock resilience in march - or just smoke and mirrors? Mike Dolan

The energy shock caused by the Iran war is unprecedented. So far, the real economy has been hit hard.

The fact that the only immediate information available is market sentiment, pricing or anecdotes makes it difficult to invest in a sudden crisis such as the Middle East conflict. When reliable data about the economic impact of a crisis finally appears, the crisis has often already passed.

The most immediate shock was in the energy markets and prices.

Brent crude futures have surged to $100 per barrel. This is a record monthly gain. U.S. crude oil jumped 52% in march, the biggest increase since the COVID-19 Pandemic. Pump prices in the United States soared over $4 per gallon, a record high for nearly four years.

Fatih Birol, the head of the International Energy Agency, described the interruption in Gulf energy supply as a crisis that was worse than both the 1973 and 1979 oil crises and the Russian gas shortage after the invasion of Ukraine combined. Birol warned on Wednesday that the oil supply losses for April would be twice as high as those in March, and will start to reduce economic growth in Europe.

We are now five weeks into the conflict, and Washington has indicated that it may be coming to an end. This is the first time we have a real idea of how businesses and households dealt with the initial crunch.

It's not as bad as many thought.

REAL OR IMAGINED?

Surveys of business sentiment around the globe showed that the service sector was feeling the pinch, but manufacturers, who are arguably most affected by the energy crunch, were actually gaining steam.

According to surveys of purchasing managers, both U.S. factories and European factories recorded their highest growth in activity in nearly four years last month. Germany and Italy registered their highest readings in 46 months and 37, respectively.

According to official surveys, even Chinese manufacturers who were in contraction during most of the last year and for the first two months in 2026 were in growth again in March.

Analysts have warned that the headline Purchasing Managers' Index – the catch-all survey – can be interpreted as a sign of positive economic heat, rather than – likely in this instance – supply disruption.

The readings may have been exaggerated.

Despite this, the business sector in most countries reported continued to grow.

According to the Institute for Supply Management's manufacturing survey, U.S. factories produced more in March. The number of new orders fell, but both the components grew rapidly.

It was clear that the prices paid by companies worldwide soared to reflect oil's price spike, but this did not halt growth. This made economists hesitant to declare a recession.

JPMorgan’s global manufacturing PMI fell in March but continued to show growth consistent with an annualized pace that is modest at 1.5%.

What about the households?

The reading for the first full month of U.S. Consumer Confidence also surprised on the positive side.

The Conference Board reported on Wednesday that the Consumer Confidence Index increased almost a full point to 91.8 in March, largely due to a rise in the "present" situation reading. This was despite the fact that the expectations component dropped and inflation concerns rose.

The labor-market differential (which gauges whether people think jobs are easy to come by or scarce) ticked up to show some stabilization.

ADP's report showed that private sector payrolls increased 62,000 in the past month, which is more than 20,000 over consensus estimates and only a few thousand short of the average for the last three years. On Good Friday, the national employment report will be in focus.

Full Year Up A Gear?

Investors have also noted a second unusual increase during this turbulent month.

Full-year earnings estimates for S&P 500 firms have risen to 18% compared to 15% just before the conflict.

The'selloff' has also reduced 12-month earnings forecasts by over 10%. They are now at their lowest in more than a year.

This is disputable. Analysts believe that the boost in earnings is mainly due to a knee-jerk increase in energy and defense combined with analysts' inertia in awaiting this month’s updates.

It's reasonable to be cautious, but the most significant forecast upgrades for March came from the tech sector. The artificial intelligence development continues to dominate almost all other disruptions.

The real economic impact may take a long time to be felt, affecting business costs and worker's wallets.

There's a chance, however, that by the time the official data is released, the conflict will have de-escalated enough to heal the energy wound. This would allow the markets to focus on a hot economy or themes such as AI.

It's not impossible, but it's still a guess.

The equivocal picture should encourage central banks to not jump to policy changes too soon - the best course of actions may be to wait.

The opinions expressed are those of Mike Dolan a columnist at. This column is great! Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.

(source: Reuters)