Small cap-focused Russell 2000 becomes the first of major U.S. benchmarks to enter correction territory

The Russell 2000 has fallen more than 10% off its recent high, becoming the first of the major U.S. benchmarks to fall into correction territory.

A correction is defined as a decline of more than 10% and less than 20%.

Small caps actually outperformed to start the year, with the Russell 2000 just 1% off in 2026 as the hope of easier monetary policy and a pivot away from large caps boosted the asset class.

But the benchmark has tumbled this month amid the ongoing war in Iran, which has spurred a more than 50% spike in Brent crude oil futures. The Russell 2000, which has greater exposure to cyclical sectors, is especially sensitive to changes in oil prices and a slowdown in the economic cycle. It’s down more than 6% this month.

The small cap index could soon be joined by other of the major averages. The Dow Jones Industrial Average and the Nasdaq Composite were last more than 9% off their all-time highs. The S&P 500 was off by more than 6%.