Why are our markets switching between green and red quicker than the local trafficlight?

As the title suggests, the extreme volatility of the 2026 markets has made it exceptionally challenging for new traders—and even for teenagers investing their weekly allowance—to achieve consistent profits. On 26 March 2026, markets saw a significant red day with the S&P 500 dropping by 1.7% to $6477.16 and the Nasdaq Composite dropping to $21408.08 (2.4%). Just today (April 1), almost all stocks are soaring into the green, rising by over 2.5%.The issue now is that it is basically impossible to tell whether this was just the market’s version of an April Fools prank where relief rallies drove up prices, or whether the market is truly back up for good? The last time we had markets this volatile was late 2022 (October-November) when The Fed aggressively hiked interest rates at the peak of inflation. Today’s situation can draw some parallels but is not entirely the same. Let’s explore the chain reaction of events that triggered these changes—more volatile than even a teenager’s mood swings.

“We’ll be winning so much, you’ll become tired of winning, and you’ll say it’s too much Mr. President”, were the words of Donald Trump, which does not resonate with how many traders are feeling currently. As expected, the escalation of the US-Iran conflict has created significant geopolitical tension, making traders extremely scared. As sentiment changes from uncertainty to fear, many traders are pulling out of stocks and strongly investing into securities such as bonds, cash or even commodities (explained later). This massive sell-off ,which puts downward pressure on prices, reflects investor belief that this conflict will last for longer than most expect.

This caused an oil shock ,with the price per barrel rising to approximately $100–115 per barrel over the past one to two weeks. Fears about oil supply caused this spike, and now oil companies like Chevron or ExxonMobil are lounging on their thrones of cash. However, on a national level, the shortage has caused significant inflation due to the hike in production costs (scarcity of resources drives up the production cost), with countries such as India or Australia suffering more due to their rapidly depleting resources. Now the real issue rises as investors were expecting the Federal Reserve to cut interest rates in 2026 (under pressure from Trump), however, inflation may cause them to maintain or increase the rates (around 3.5-3.75% in March) which hurts equities the most. This means that price valuations are lower, borrowing becomes more expensive, and government-issued securities provide higher returns, causing investors to redirect funds towards the safe-haven assets (as was said earlier). This hits companies with smaller market caps the hardest as survival in tougher conditions is not as easy as it may be for Apple or any other giants.

As it is expected from the large scale of such an event, European and Asian markets are not immune to market fluctuations. For example, Japanese officials are now saying that the Yen’s volatility is something to be flagged as speculative- which means that they are being driven not by interest rates, inflation, or economic growth, but by the actions of large hedge funds and short-term traders. Speculative activity- ranging from shorting the Yen to taking on highly leveraged positions-creates an unstable currency which can have significant impacts on Japan’s Balance of Payments (BoP). In a worst case scenario, there can be a triple sell-off of stocks, bonds, and currency. Newer bonds offer higher returns, causing investors to sell older ones, while pressure on the yen weakens the currency, meaning there is no safe haven for traders focused on minimizing losses rather than making profits.

If oil stays up in the long run, it will increase costs (inflation), reduce consumer spending, cause a fall in business production, and since there is no growth, markets will spiral into textbook recessions. To conclude, current market volatility is influenced by oil prices which create inflation, resulting in sell-offs, and the movement toward safe havens like bonds or currencies. However, the twist this time is that profit-hungry traders who short currencies and newer bonds can trigger a triple sell-off, eliminating any safe haven and leaving investors confined to cash or ultra-short-term instruments until volatility stabilizes.

The markets may provide tough waters, but we should continue sailing on with determination, and the hope that the war may stop- not only so that countless lives can stop being lost, but so that the average investor can take a sigh of relief once again !