Shares of IGV, the $10 billion iShares Expanded Tech-Software Sector ETF, climbed 1.8% to $78.29 on Monday, clawing back a fraction of last week's brutal selloff driven by the escalating U.S.-Israel war on Iran. The bounce offers a breather, not a cure — the fund is still down 7.3% in just five trading days and down roughly 24.5% year-to-date, raising a hard question about whether geopolitical risk has permanently repriced software stocks.
A Dead-Cat Bounce After the Worst Week in Months
On March 26, Brent crude jumped more than 5% to $107 per barrel as escalating military tensions in the Middle East triggered a massive surge in crude oil futures.
The effective closure of the Strait of Hormuz — through which roughly 20% of the world's oil supply passes — is no longer a theoretical risk but a present reality. That drove IGV down 3.59% on March 27 alone. Today's +1.8% recovers less than half of that single-day loss. At $78.29, the ETF sits just $2 above its 52-week low of $76.26.
Oil Above $100 Makes the Fed's Job Harder — and That Hurts Software Valuations
Rising energy prices have complicated the inflation outlook. The consumer price index rose 2.4% in January, but the oil shock caused by the war could wipe out those gains. Former Federal Reserve Chair Janet Yellen has warned that economic growth will suffer and the Fed's job of containing inflation will become more difficult. Higher-for-longer interest rates punish software stocks disproportionately because their value hinges on profits years into the future, which are worth less when rates stay elevated.
Cheap on Paper, but the Discount May Be Deserved
The S&P North American software index traded below 20 times forward earnings for the first time ever. It's at roughly 23 now, still well below its long-term average of 34.
Software and services companies in the S&P 500 are projected to deliver 21% earnings growth this year. In the fourth quarter, 93% of software companies beat profit estimates. Fundamentals remain solid, but investors face a double threat: AI disruption fears and a war-driven inflation shock.
The Geopolitical Overhang Isn't Going Away Soon
If the conflict is prolonged and disruptions in the Strait of Hormuz are significant, oil could reach $100/barrel but should end 2026 around $70 as the market would eventually adapt.
Goldman Sachs has sharply revised its oil price forecasts for 2026, projecting that Brent crude will average $85 a barrel — up from an earlier estimate of $77. Until energy markets stabilize, software's rebound will remain hostage to headlines from the Persian Gulf. A 1.8% bounce after a 7.3% weekly decline isn't a recovery — it's a pause.