Wall Street posts weekly loss as Iran war drives oil, inflation fears
Synopsis
Wall Street ended lower and posted weekly losses as oil price volatility linked to the Iran conflict raised inflation concerns and reduced expectations of near-term Fed rate cuts.
Wall Street closed lower on Friday and posted weekly losses as volatile oil prices linked to the conflict involving Iran heightened concerns about inflation and global supply disruptions. Investors also assessed weaker economic data and the potential impact of rising energy costs on the Federal Reserve’s interest rate outlook.
Key highlights
- Wall Street ends lower, posts weekly losses
- Oil prices surge with Brent settling above $100 per barrel
- Iran conflict raises fears of global oil supply disruption
- Investors scale back expectations of near-term Fed rate cuts
- Technology shares lead S&P 500 sector losses
Major indexes decline for the week
All three major US stock indexes ended Friday in negative territory, extending declines for the week as investors navigated sharp swings in energy markets.
The Dow Jones Industrial Average fell 119.38 points, or 0.26%, to 46,558.47. The S&P 500 dropped 40.43 points, or 0.61%, to 6,632.19. The Nasdaq Composite declined 206.62 points, or 0.93%, to 22,105.36.
The Russell 2000 small-cap index also closed at its lowest level of the year, reflecting broader market weakness.
Oil market volatility rattles investors
Energy markets remained highly volatile as investors tracked developments in the conflict involving Iran and its potential impact on global oil supply.
Front-month West Texas Intermediate (WTI) crude settled at $98.71 per barrel, up 3.11%, while Brent crude rose 2.67% to $103.14, marking its first close above $100 per barrel since August 2022.
The rise in oil prices came despite US President Donald Trump temporarily easing sanctions on Russian oil in an attempt to ease supply concerns.
Paul Nolte, senior wealth advisor and market strategist at Murphy & Sylvest, said energy market volatility had been unusually intense.
“We've seen volatility in the energy market that rivals any two-week period in cryptocurrency history,” Nolte said, adding that markets currently appear driven more by sentiment than fundamentals.
Iran conflict raises supply concerns
Geopolitical tensions escalated after Trump warned that the United States would hit Iran “very hard over the next week.”
Reports that the conflict had spread to Lebanon, Kuwait, Iraq, the United Arab Emirates, Bahrain and Oman further dampened hopes of a quick resolution.
In response, Iran tightened its control over the Strait of Hormuz, a critical shipping route through which about one-fifth of the world’s oil supply passes.
The International Energy Agency said earlier this week that the conflict could cause the largest disruption to global oil supply in history, intensifying market concerns.
Economic data adds to uncertainty
Investors also digested a series of economic reports that pointed to weakening momentum in the US economy.
The Commerce Department sharply revised down fourth-quarter GDP growth, while other indicators suggested softening demand for durable goods.
Meanwhile, the Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, showed little change, indicating that inflation pressures remain persistent.
Despite the mixed data, analysts said the surge in oil prices could complicate the Fed’s policy outlook.
Fed likely to stay on hold
The Federal Reserve is widely expected to keep interest rates unchanged at its upcoming policy meeting next week.
However, rising energy prices could delay any potential rate cuts.
Peter Cardillo, chief market economist at Spartan Capital Securities, said higher oil prices could keep inflation elevated.
“Inflation remains elevated, and with the possibility of energy prices eventually moving into the pipeline, the Fed is likely to stay on hold for a longer period,” Cardillo said.
Sector performance and corporate moves
Among the 11 sectors of the S&P 500, technology stocks recorded the biggest decline, while utilities were the strongest performers.
The financial sector fell 3.4% for the week, reflecting concerns about credit quality.
Several corporate developments also weighed on sentiment.
Shares of Adobe dropped 7.6% after the company announced that longtime CEO Shantanu Narayen would step down once a successor is named, raising concerns about potential AI-related disruption.
Meta Platforms slid 3.8% following reports that it had delayed the release of its artificial intelligence model “Avocado” until at least May.
Market outlook
Markets are expected to remain volatile as investors monitor developments in the Middle East conflict and oil prices.
The Federal Reserve’s policy decision next week will also be closely watched for signals on how policymakers are assessing inflation risks tied to rising energy costs.
FAQs
Q1: Why did Wall Street fall this week?
Stocks declined mainly due to volatile oil prices and geopolitical tensions involving Iran, which raised concerns about inflation and global supply disruptions.
Q2: How did oil prices move?
Brent crude settled above $100 per barrel for the first time since August 2022, while WTI crude climbed close to $99 per barrel.
Q3: What is the Federal Reserve expected to do next?
The Fed is widely expected to keep interest rates unchanged at its upcoming policy meeting.
Q4: Which sectors performed worst?
Technology stocks posted the largest losses, while utilities recorded the biggest gains within the S&P 500.
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I write about markets, money, and the macro forces that move them. Passionate about turning complex economic trends into sharp, easy-to-understand stories. Off the clock, it’s hip hop, rock, reggae -- and a mix of cricket and basketball.
