Shares of the Vanguard Information Technology ETF slid 1.5% to $710.67 on March 20 as a cocktail of geopolitical violence and a stubborn Federal Reserve drove investors out of growth stocks and into bunkers. The selloff erased a week of gains, dragging VGT below its March 13 close of $714.44, and raises a pointed question: how long can the tech trade hold up when both energy costs and borrowing costs are climbing simultaneously?
Tech Stocks Buckle as Oil Spikes and Missiles Fly: Can VGT Weather a Two-Front Storm?
Shares of the Vanguard Information Technology ETF slid 1.5% to $710.67 on March 20 as a cocktail of geopolitical violence and a stubborn Federal Reserve drove investors out of growth stocks and into bunkers. The selloff erased a week of gains, dragging VGT below its March 13 close of $714.44, and raises a pointed question: how long can the tech trade hold up when both energy costs and borrowing costs are climbing simultaneously?
• Oil Near $109 Means Higher Costs for the Companies Tech Investors Own
Oil prices rose more than 5% after an Israeli strike on Iran's South Pars gasfield , pushing Brent crude to $108.66 a barrel. That matters for VGT holders because big tech companies run massive data centers and global supply chains that consume enormous amounts of energy. Iran's closure of the Strait of Hormuz has disrupted 20% of global oil supplies. Analysts warn the damage goes beyond crude: "This latest escalation feels like a turning point for markets because the conflict is no longer just about military headlines," one strategist said—"it is now hitting the plumbing of the global energy system."
• The Fed Just Told Markets: Don't Expect Much Relief on Rates
The Fed voted 11-1 to hold its benchmark rate at 3.5%–3.75% as policymakers navigate higher-than-expected inflation and a war.
Officials now expect 2.7% inflation this year on both headline and core measures.
The closely watched "dot plot" pointed to just one reduction this year and another in 2027. Higher-for-longer rates raise the discount rate investors use to value future earnings—a direct hit to tech stocks, whose worth hinges on profits years away.
• The Stagflation Word Is Back, and It's Kryptonite for Growth Stocks
"What is unsettling markets now is the growing stagflation risk," noted Saxo's chief investment strategist—meaning prices rise while the economy slows.
The Fed revised its growth forecast down to just 0.9% for 2026.
Stocks fell after Chair Powell said the U.S. had not made as much progress on inflation as hoped. For VGT, which is heavily weighted toward mega-cap names like Apple, Microsoft, and Nvidia, stagflation is the worst-case scenario: consumers and businesses pull back spending on new technology while input costs rise.
• How Deep Could the Damage Go?
Capital Economics warned that in a longer war, oil could reach $130 per barrel in Q2, and even a three-month conflict could push Brent to an average of $150 over six months. Treasury yields at 4.29% already price in persistent inflation. If oil stays triple-digit, corporate earnings estimates—the foundation of VGT's valuation—face downward revisions across the sector. Shareholders should watch for a ceasefire timeline; as one analyst put it, "the only thing that could really turn this around is the reopening of the Strait of Hormuz."