Stocks Struggle as Oil Surge and Iran War Cloud Inflation Outlook – US Market Wrap
US markets remained subdued as geopolitical tensions kept pressure on both stocks and bonds, while oil surged despite an unprecedented release of emergency reserves from major economies.
US crude climbed above $87 even after the International Energy Agency approved its largest-ever drawdown of strategic stockpiles. Inflation data released before the escalation in the Middle East showed underlying price pressures cooling, but that provided little support for equities as investors focused on the potential inflationary impact of higher energy prices. Treasuries declined, pushing the yield on 10-year notes up six basis points to 4.22%, and reinforcing expectations that the Federal Reserve may deliver only one rate cut this year.
Developments in the Iran conflict continued to dominate sentiment. President Donald Trump said he does not believe Iran has been laying mines in the Strait of Hormuz and suggested the war could end soon. Meanwhile, Iran has reportedly indicated through regional intermediaries that a ceasefire would require guarantees that neither the US nor Israel would strike the country again.
Energy policy is also shifting in response to the supply shock. The US is considering measures to boost domestic production, including the possible use of Cold War-era authorities to reopen offshore drilling along the southern California coast, while the IEA plans to release 400 million barrels from emergency reserves.
Although February’s inflation figures suggested price pressures were easing before the conflict intensified, the surge in energy costs has revived concerns that inflation could remain elevated.
The S&P 500 finished little changed on the session.
