S&P 500 Falls to Its Lowest Level Since November as Stagflation Fears Grip Markets and Treasury Yields Keep Climbing

If it seems like not long ago when the S&P 500 was reaching new all-time highs, that’s because it was. The benchmark index reached a record high of just over 7,000 in late January, but it has since given back all of its 2026 gains and then some.

Of course, the index is less than 5% below the high, so it’s important to keep things in perspective. But this is the lowest level the S&P 500 has reached since November, and there are other concerning signs across the market.

For one thing, the 10-year Treasury yield has spiked sharply since the Iran conflict started. Small-cap stocks – which tend to be more economically sensitive – have been beaten up worse than the S&P 500, with the Russell 2000 down by more than 8%. Plus, oil prices have risen by a staggering 65% so far in 2026, including a 35% spike in just the first 12 days of March.

Stagflation fears are rising

Stagflation is the combination of stagnant economic growth and elevated inflation, and it’s increasingly a concern.

Image source: Getty Images.

We’ve certainly seen muted economic growth recently. U.S. real GDP growth was just 1.4% in the fourth quarter of 2025, well below expectations. In February, the most recent month for which full data is available, the unemployment rate in the U.S. ticked higher to 4.4% after the economy unexpectedly lost 92,000 jobs.

On the inflation side, a 2.4% increase in the CPI for February might not sound too bad – and it isn’t. But keep in mind that this was largely before the spike in oil prices. Not only will the 35% spike in oil prices impact CPI all by itself (energy accounts for more than 6% of the CPI formula), but it could also affect several other everyday expense categories.

For example, higher gasoline prices could make it more expensive for food retailers to transport products to their stores, and these costs could be passed on to the customer. Airline fares could rise along with fuel costs, making travel more expensive. These are just a couple of examples, but the point is that the inflationary impacts of oil go beyond just energy costs.

It’s all about what we _don’t _know yet

Of course, it’s completely unclear at this point how long the Iran situation will last, and what its inflationary impacts will ultimately be. A prolonged conflict that keeps oil prices above $100 per barrel for the rest of 2026 would have an entirely different impact than one that lasts just a few weeks. But it’s exactly this uncertainty that has markets on edge.