Deutsche Bank’s Henry Allen says US and European equities have fallen less than during past oil shock periods, with markets appearing to price in a short conflict, firm macro data and still-dovish central banks. The S&P 500 and Europe’s STOXX 600 are 5–6% below their record highs.
US data cited include the March jobs report, the first covering the period since the strikes began on 28 February. It showed nonfarm payrolls rising by +178k, the strongest in 15 months, while unemployment edged down to 4.3%.
The note refers to earlier episodes when oil shocks coincided with equity drawdowns and later recoveries. Examples include 1979–80, when Paul Volcker raised rates aggressively and a US recession occurred in early 1980, and 1990–91.
It also references 2022, when global central banks raised rates aggressively during a bear market. That period was followed by a recovery in 2023, with the S&P 500 reaching a new record by early 2024.
The article states it was created with the help of an Artificial Intelligence tool and reviewed by an editor.
We are seeing that risk assets are holding up much better than they did during historical oil shocks. Looking back to the events of early 2025, the S&P 500’s drawdown was surprisingly shallow, with the index staying only 5-6% below its record highs. This pattern of resilience suggests that selling out-of-the-money puts to collect premium could be a viable strategy during any minor pullbacks in the coming weeks.
This market confidence seems rooted in strong economic fundamentals, which have continued into this year. The latest jobs report for March 2026 showed the economy added a solid 215,000 nonfarm payrolls, keeping the unemployment rate low at 3.8%. This underlying economic strength tends to dampen volatility, which could make shorting VIX futures profitable if the market remains steady.
We have seen this playbook before, even following more significant downturns. For instance, after the aggressive central bank rate hikes of 2022 led to a bear market, the S&P 500 staged a powerful recovery throughout 2023 and into early 2024. This history supports using any dips as opportunities to establish defined-risk bullish positions, such as buying call spreads, to capture a potential rebound.
A key factor is that central banks do not appear poised for aggressive tightening like they were in 1980 or 2022. Recent statements from the Federal Reserve indicate a continued pause on interest rates, especially with core inflation now trending just below 3%. This backdrop limits the probability of a sharp, unexpected market shock, providing a favorable environment for strategies that profit from range-bound or slowly appreciating markets.
