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Uncertainty among CFOs rose more than any other concern during the first quarter even as their optimism in the economy edged up compared with last quarter, the Federal Reserve Banks of Richmond and Atlanta said Wednesday, citing a survey.

Tariffs and trade policy led the list of concerns among CFOs during Q1, followed by labor quality/availability and demand/sales/revenue. While fourth on the list, uncertainty was the only major concern that CFOs mentioned more than during Q4 2025, according to a survey conducted with Duke University’s Fuqua School of Business from Feb. 17 to March 5.

“Most firms expected demand to increase in the next 12 months and reported continued hiring, albeit more for replacement than for new positions,” Sonya Ravindranath Waddell, a Richmond Fed vice president and economist, said in a statement. “Very few firms expected declining demand or a need to lay off workers,” she said.

The Iran war has clouded the business outlook with uncertainty since the first attacks by U.S. and Israeli warplanes on Feb. 28.

The prices of both oil and gas have surged following a seize up in supply chains for energy and other commodities linked to the Middle East.

Financial market volatility has flared this month, with the Cboe Volatility Index, or VIX, hitting the highest level since the announcement of sweeping U.S. tariffs in April 2025.

Also, the yield on the 10-year Treasury note — the benchmark for the cost of corporate and other borrowing — has jumped from 3.97% on Feb. 27 to 4.32% on Wednesday.

“The past several days have marked a notable increase in bond market volatility,” RSM U.S. Chief Economist Joe Brusuelas said in a note Wednesday.

“Investors’ concerns include an unsustainable American fiscal position, rising inflation risk and a growing uncertainty about war,” he said.

“This is part of a wider move across asset markets as the war has moved from one of short-term disruption of energy supplies to longer-term structural damage to the regional production and refining capacity,” Brusuelas said.

The Merrill Lynch Option Volatility Estimate, or MOVE Index, gauging volatility in the U.S. Treasury market has jumped above its 52-week average to levels seen during “past episodes of price instability and policy dysfunction,” he said.

The index is an early warning sign of financial market disruption, he said, adding “sharp increases like those of the past several days are a reflection of increasing uncertainty,” Brusuelas said.

The Federal Reserve on March 18 held the main interest rate steady, noting the uncertain impact on the economy from the Iran war.

Fed Chair Jerome Powell said at a post-meeting news conference that it is too early to predict whether fighting in Iran will lead to a sustained surge in the price of oil, spurring inflation in the U.S., crimping consumer spending and slowing economic growth.

Still, policymakers “continue to contend with inflation notably above the Federal Open Market Committee’s 2% goal,” Fed Governor Michael Barr said Tuesday.

“While I am hopeful that inflation will fall as the effects of tariffs on prices wane later this year, I would like to see evidence that goods and services price inflation is sustainably retreating before considering reducing the policy rate further, provided labor market conditions remain stable,” Barr said.

“Moreover, the conflict in the Middle East raises additional risks,” he said in a speech. “Higher oil prices tend to pass through pretty quickly to gasoline prices, and higher gasoline prices can be particularly painful for low- and moderate-income families.”

U.S. companies have apparently become more cautious. Growth in business activity in March slowed to an 11-month low as the Iran war pushed up prices and restrained new orders, S&P Global said Tuesday.

Service sector activity rose at the weakest pace in nearly a year, and businesses responded to higher input costs and a spike in energy prices by raising average selling prices at the fastest rate since August 2022, S&P Global said.

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