Markets Extend Losses for a Third Week Amid Geopolitical Tensions and Rising Oil Prices

Markets Extend Losses for a Third Week Amid Geopolitical Tensions and Rising Oil Prices

Major stock indexes declined for a third consecutive week as escalating conflict in the Middle East and heightened volatility in oil markets dominated headlines. Energy prices swung throughout the week as investors balanced the risk of sustained supply disruptions through the Strait of Hormuz, a key global oil shipping route, against intermittent signs that tensions could ease. Global equities, as measured by the MSCI ACWI, declined 1.74% for the week, while domestic large-cap stocks, measured by the S&P 500, fell 1.56%.

Energy Prices Continue to Rise

Escalating conflict in the Middle East and disruptions to shipments through the Strait of Hormuz continued to drive sharp swings in energy markets for a second straight week. U.S. crude futures surged to as high as $119 per barrel on Monday before briefly falling below $77 the following day, and by Friday afternoon oil was trading near $98, up significantly from a recent low around $65 at the end of February.

Economic News

In economic news, inflation data delivered mixed signals. The U.S. Bureau of Labor Statistics reported that core CPI rose 0.2% month over month in February, in line with expectations and down from January’s 0.3% increase, while the annual rate held steady at 2.5% and headline CPI rose 0.3% for the month and 2.4% year over year. Meanwhile, the Bureau of Economic Analysis reported that the core personal consumption expenditures index, the Federal Reserve’s preferred inflation measure, increased 0.4% in January and rose 3.1% year over year, the highest level since early 2024.

GDP Growth Slows

The Bureau of Economic Analysis also reported that U.S. economic growth slowed more than previously estimated in the fourth quarter, with the second reading of real GDP showing an annualized growth rate of 0.7%, down from the initial estimate of 1.4%, reflecting weaker exports, consumer spending, government spending, and business investment.

Looking Ahead

For the week ahead, all eyes will be on the Federal Reserve meeting set to conclude on March 18. Bond market pricing continues to reinforce expectations of a policy pause following recent rate cuts, with futures markets implying a 99% probability that the Fed will keep rates unchanged, according to CME FedWatch, after policymakers held rates steady in January following cuts at the prior three meetings.

As Always

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.