VIX Hits 31 as Iran War Fuels Market Volatility
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- VIX rose 11.83% and closed at 31 on March 27, placing it in the highest decile (≥28.3) since Jan 1990.
- Iran war triggered the closure of the Strait of Hormuz on Feb 28, cutting off roughly 20% of daily global liquid petroleum flow, the biggest energy supply disruption in history.
- U.S. inflation is expected to surge in March (and possibly beyond), fueling concerns that the Federal Reserve may shift from rate easing to rate hikes.
- Jerome Powell is slated to leave his role as Federal Reserve chair in six weeks, a rare leadership change occurring while the market is historically expensive.
- Charlie Bilello of Creative Planning notes that the S&P 500 has historically delivered a 22% average forward total return (including dividends) one year after VIX readings enter the highest decile, compared with an 11% return in lower volatility periods.
Why it matters: Long‑term investors stand to gain as the S&P 500 historically yields double the forward returns after high‑volatility periods, while short‑term traders may face steep losses amid the 9% S&P 500 slide and heightened uncertainty from the Iran‑induced oil disruption and impending Fed chair transition.
