Weekly Update

Market Slides as Oil Surges

📈 Markets Slide as Oil Surges and Geopolitical Tensions Rise

Stocks had a difficult week as rising geopolitical tensions, higher oil prices, and a surprisingly weak jobs report pushed markets lower. The S&P 500 fell around -2% last week and is now down for the year.

The biggest driver behind the decline was the escalating conflict between the U.S. and Iran, which has disrupted energy markets and caused oil prices to surge. Concerns about higher energy costs, combined with mixed economic data, kept volatility elevated throughout the week.

Adding to market pressure was a weaker-than-expected jobs report on Friday. The report showed 92,000 jobs lost in February, which surprised economists who were expecting modest job growth.

Despite the negative headline, many economists believe the report may be an outlier because other labor market indicators remain relatively stable.

The big picture: rising oil prices and geopolitical uncertainty are currently the main forces driving market swings.

💹 Rates, Dollar & Commodities

Commodities were one of the biggest stories last week.

Oil prices surged dramatically as tensions in the Middle East disrupted energy supply routes. At one point, oil rose more than 30% during the week, the largest weekly jump on record.

The situation is tied largely to disruptions around the Strait of Hormuz, one of the world’s most important shipping routes for oil. When oil supply routes are threatened, prices tend to rise quickly. As of this writing, oil futures have climbed above $100 per barrel in the futures markets, which is adding additional pressure to global markets.

Treasury yields also moved higher last week, with the 10-year Treasury ending around 4.10%. Higher oil prices increased concerns about inflation, which pushed yields upward. The U.S. dollar strengthened slightly as investors sought safety during the market volatility.

Gold, which often acts as a safe-haven asset during uncertain times, held relatively steady despite the broader market turbulence as the stronger dollar and rising treasury yields seemingly offset the safety trade.

Source: Stockcharts.com

🔎 Takeaway

Right now, the market is focused on two key issues- Energy prices and geopolitical tensions.

It’s important to understand that the market is not reacting to the conflict itself as much as it is reacting to how the conflict impacts global energy supply. If the Strait of Hormuz remains disrupted or attacks on energy infrastructure continue, oil prices could stay elevated. Sustained higher oil prices can increase inflation and put pressure on economic growth.

However, if tensions begin to ease or shipping routes reopen, markets could rebound quickly. At the moment, it appears the biggest near-term risk to stocks could be oil prices staying elevated for several weeks and slowing economic activity.

Still, unless energy disruptions become severe and prolonged, this situation is more likely to cause short-term volatility rather than a long-term market downturn.

🔭 This Week – What Matters for Markets

The most important economic reports this week will be Wednesday’s Consumer Price Index (CPI) and Friday’s Core PCE Price Index. These reports measures inflation and will give investors a better idea of whether price pressures are easing or rising again. On Friday, we will also get a look at business spending via the Durable Goods report, and another read on the labor market with the JOLTS (Job Openings and Labor Turnover) report.

Markets would prefer to see inflation remain stable or move closer toward the Federal Reserve’s 2% target. If inflation comes in higher than expected, it could delay potential interest rate cuts and create additional pressure for stocks. Investors would also likely welcome a stable JOLTS report and see that business investments remain strong.

Outside of economic data, investors will be closely watching developments in the U.S.–Iran conflict. Futures are already lower early this week as oil prices surged above $100 per barrel following continued tensions and no progress toward reopening the Strait of Hormuz.

Any headlines suggesting de-escalation could quickly lift markets, while new attacks on energy infrastructure could push oil prices higher and weigh further on stocks.

🌐 Broad Overview

The market is currently dealing with a combination of geopolitical risk, rising energy prices, uncertainty about inflation, and conflicting labor market data.

While these factors have increased volatility, the broader economic backdrop still shows signs of resilience. Consumer spending remains stable, and business activity data continues to point toward economic expansion.

Because of that, the current pullback looks more like a period of adjustment rather than a major market downturn. If energy markets stabilize and inflation remains under control, stocks could regain momentum in the coming weeks. For now, it appears investors need to deal with continued volatility as markets navigate the headlines.

If you have any questions about your portfolio or the market outlook, please contact your CIAS Investment Adviser Representative.