Key Findings

  • Chief financial officers' concerns about uncertainty rose more in the first quarter than any other worry, even as their optimism about the economy edged up from the previous quarter, according to a survey cited Wednesday by the Federal Reserve Banks of Richmond and Atlanta.
  • Tariffs and trade policy topped CFOs' list of worries for the first quarter, followed by labor quality/availability and demand/sales/revenue. Although uncertainty ranked only fourth, it was the only major concern that CFOs cited more often than in the fourth quarter of 2025, according to the survey conducted by Duke University's Fuqua School of Business from Feb. 17 to March 5.
  • "Most firms expect demand to grow over the next 12 months and report continued hiring, though more for replacement than for new positions," Richmond Fed vice president and economist Sonia Lavender Waddell said in a statement. "Few firms expect demand to decline or anticipate layoffs," she added.

Deeper Analysis

The Iran war has cast a shadow of uncertainty over the business outlook since U.S. and Israeli warplanes launched their first strikes on Feb. 28.

Oil and natural gas prices have both surged due to disruptions in supply chains for energy and other commodities linked to the Middle East.

Financial market volatility has intensified this month, with the Cboe Volatility Index (VIX) rising to its highest level since the U.S. announced sweeping tariffs in April 2025.

Additionally, the yield on the 10-year U.S. Treasury note—a benchmark for borrowing costs for corporations and others—has jumped from 3.97% on Feb. 27 to 4.32% on Wednesday.

"Bond market volatility has increased significantly over the past few days," Joe Brusuelas, chief economist at RSM US, said in a report Wednesday.

"Investor concerns include unsustainable U.S. fiscal conditions, rising inflation risks, and growing war uncertainty," he said.

"This is part of a broader move across asset markets as the war has evolved from a short-term disruption to energy supplies into longer-term structural damage to regional production and refining capacity," Brusuelas added.

The MOVE index, which measures volatility in the U.S. Treasury market, has jumped above its 52-week average to levels seen during "past periods of price instability and policy dysfunction," he said.

The index is an early warning signal for financial market turmoil, he said, and "sharp rises like those seen over the past few days reflect increased uncertainty," Brusuelas stated.

The Federal Reserve held its key interest rate steady on March 18, citing uncertainty about the economic impact of the Iran war.

Fed Chair Jerome Powell said at a post-meeting press conference that it was too early to predict whether the Iran fighting would lead to a sustained surge in oil prices, reignite U.S. inflation, dampen consumer spending, and slow economic growth.

Still, policymakers "continue to deal with inflation running notably above the Federal Open Market Committee's 2% target," Fed Governor Michael Barr said Tuesday.

"While I hope inflation will decline as the effects of tariffs on prices fade later this year, before considering further reductions in the policy rate, I want to see evidence of sustained progress in bringing down price inflation for goods and services, provided labor market conditions remain stable," Barr said.

"In addition, the Middle East conflict poses additional risks," he said in his speech. "Oil price increases tend to pass through quickly to gasoline prices, and higher gasoline prices can be particularly painful for low- and middle-income households."

U.S. businesses have clearly become more cautious. S&P Global said Tuesday that business activity growth slowed to an 11-month low in March, as the Iran war pushed up prices and dampened new orders.

S&P Global said services activity grew at its weakest pace in nearly a year, with firms responding to higher input costs and surging energy prices by raising average selling prices at the fastest rate since August 2022.