The oil price blasted through $119 over the weekend with the Strait of Hormuz still closed to traffic, forcing major producers to curb production with storage facilities full to the brim. Iran signaled no let-up in its reaction to being bombed by selecting a continuity hardliner as its new leader.

Asian stocks collapsed on Monday in response with Japanese equities entering an official correction. European markets also crumbled, with stocks giving up the entirety of their once-substantial 2026 gains and local interest rates soared.

US stocks are less impacted by energy prices, but still shifted sharply lower at the open before staging a dramatic comeback after the oil price fell back under $90 on the back of Trump seemingly setting up for a quick victory lap, claiming that the conflict is “very complete”. He also asserted that the military operation is “far ahead” of its initial four- to five-week timeframe. The indexes whipsawed and surged to close the session deep in the green.

Asian and European markets mostly took Trump at his word and bounced back nicely but, with zero sign of any de-escalation on the ground and Hegseth contradicting his boss by signaling an active intensification of the conflict, Wall Street was far more skeptical of the president’s claims on Tuesday and failed to follow through on Monday’s furious late rally.

The indexes closed the session unchanged even as the oil price continued its head-spinning reversal, briefly dipping below $80 at one point after Energy Secretary Wright somehow managed to falsely claim that a tanker had been successfully escorted through the Strait.

Overnight, Oracle, whose stock price had been cut in half since September, surprised to the upside with its earnings and the International Energy Agency (IEA) proposed the largest release of reserves in history in an attempt to bring down the price of oil.

Before the open on Wednesday, the latest CPI numbers showed February inflation was unchanged as expected at a 2.4% annualized rate. The oil price failed dismally to respond as hoped to the IEA proposal, climbing back above $90.

Stocks essentially flatlined all day and interest rates moved higher in the absence of any further meaningful reliable information coming from the front lines and continued confused messaging from US government officials about the ultimate goals and likely duration of the war.

With three oil tankers ablaze in the Strait of Hormuz on Thursday after being attacked by Iran despite Trump’s empty promises of naval protection, the US administration announced that it would release some of its own Strategic Petroleum Reserve, suspended the Jones Act and bizarrely even eased oil sanctions on Iran’s close ally, Russia, in increasingly desperate attempts to rein in the unstable oil price which had by now roared back above $100 after a defiant message from Iran’s new leadership and Israel’s continued brutal pounding of Lebanon. The stock indexes took a sizable leg lower with tech and financial names having a particularly rotten session.

Friday was another miserable day for stocks as oil traders refused to be gaslit by Trump and Hegseth’s chest-thumping rah-rah war rhetoric, focusing instead on facts and data and holding the price above $100. The latest GDP estimate (+0.7%) showed even slower economic growth than had been earlier feared and we also saw the highest measure of PCE inflation (+3.1%) for over two years, sending interest rates spiraling higher and snuffing out any slight lingering hopes of a Fed Funds Rate cut this week (see INTEREST RATE EXPECTATIONS below). The S&P 500 and the NASDAQ quickly gave up early gains and sank again to end the week lower and deeper in the red for for 2026.

Some other things I’m thinking about ..

* Everything right now is tethered to energy pricing. That leash is jerking financial markets around as oil and gas prices surge, retreat and then surge again with each new headline. Market memories have begun to flood back to early 2022, when initial highly bullish sentiment was quickly derailed by an oil-price-impacting war in Ukraine and resulted in a distinctively bad year for both stocks and bonds.

* Investors are still just about pricing in a short war. That widespread assumption rests on history and political game theory; Trump’s tendency to back down whenever things get tough, gas prices at the pump spiking ahead of the midterms later this year with both the House and the Senate in play and a calculation that Iran won’t be willing to keep enduring such an air assault.

* Trading algorithms used by major institutions are trained to react to facts and data, not to random tweets and social media nonsense. Last week’s shameless episode of energy secretary and cabinet member Chris Wright deliberately lying on X (even including a fake video) about a market-moving event with the clear intent of trying to manipulate oil prices lower for political gain casts further doubt on how much Wall Street is able to trust any war-related information coming out of this administration.

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ARTICLE OF THE WEEK ..

Accept uncertainty as a starting point.

.. AND I QUOTE ..

“Trump might have declared that the war was running ahead of schedule, but no-one seems to have told the Iranians.”

Chris Beauchamp, Chief Market Analyst at IG

LAST WEEK BY THE NUMBERS:

Last week’s S&P 500 market color courtesy of finviz.com

Last week’s best performing US sector: Energy (two biggest holdings: Exxon-Mobil, Chevron) for the second week in a row ⬆︎ 2.0% for the week

Last week’s worst performing US sector: Financials (two biggest holdings: Berkshire Hathaway, JP Morgan) ⬇︎ 3.3% for the week

* SPY, a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. Its price fell 1.5% last week, is down 2.9% so far this year and ended the week 5.1% below its all-time record closing high (01/27/2026).

* IWM, a US Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. Its price fell 1.7% last week, is up 0.2% so far this year and ended the week 7.6% below its all-time record closing high (01/22/2026).

* VXUS, a Global Non-US ETF, tracks the MSCI ACWI Ex-US index, made up of over 8,500 of the largest names from a universe of stocks issued by companies from around the world excluding the United States, in both developed and emerging markets. Its price fell 1.6% last week, is up 1.7% so far this year and ended the week 9.0% below its all-time record closing high (02/25/2026).

INTEREST RATES:

* FED FUNDS RATE * ⬌ 3.625% (unchanged from a week ago)

* PRIME RATE ** ⬌ 6.75% (unchanged from a week ago)

* 3 MONTH TREASURY ⬆︎ 3.72% (3.69% a week ago)

* 2 YEAR TREASURY ⬆︎ 3.73% (3.56% a week ago)

* 5 YEAR TREASURY ⬆︎ 3.87% (3.72% a week ago)

* 10 YEAR TREASURY *** ⬆︎ 4.28% (4.15% a week ago)

* 20 YEAR TREASURY ⬆︎ 4.89% (4.74% a week ago)

* 30 YEAR TREASURY ⬆︎ 4.90% (4.77% a week ago)

Data courtesy of the Federal Reserve and the Department of the Treasury as of the market close on Friday

* Decided upon by the Federal Reserve Open Market Committee at periodic meetings 8x a year. Used as a basis for overnight interbank loans and for determining high yield savings interest rates.

** Wall Street Journal Prime Rate as of Friday’s close. Tending to move in lockstep with the Fed Funds Rate, this measure is used as a basis for determining certain consumer loan interest rates such as credit cards, auto loans, personal loans, home equity loans/lines of credit and securities-based lending.

*** Used as a basis for determining mortgage interest rates.

AVERAGE 30-YEAR FIXED MORTGAGE RATE:

* ⬆︎ 6.11%

One week ago: 6.00%, one month ago: 6.09%, one year ago: 6.65%

Data courtesy of the Freddie Mac Primary Mortgage Market Survey

INTEREST RATE EXPECTATIONS:

Where will the Fed Funds interest rate be after the next rate-setting meeting on March 18th?

* Unchanged from now .. ⬆︎ 98% probability (96% a week ago)

* 0.25% lower than now .. ⬇︎ 2% probability (4% a week ago)

With seven more rate-setting meetings in 2026, what is the most commonly-expected number of remaining 0.25% Fed Funds interest rate cuts this year?

* ⬇︎ One (down from two a week ago)

Data courtesy of CME FedWatch Tool as of the market close on Friday.

All data based on the Fed Funds interest rate (currently 3.625%).

PERCENT OF S&P 500 STOCKS ABOVE THEIR OWN 200-DAY MOVING AVERAGE:

* ⬇︎ 48%

One week ago: 56%, one month ago: 65%, one year ago: 33%

Data courtesy of MacroMicro as of Friday’s market close

This widely-used technical measure of market breadth is considered to be a very robust indicator of the overall health of the S&P 500 index.

A high percentage (above 70%) generally suggests broad market strength and a bullish trend, while a low percentage (below 30%) may indicate market weakness and a bearish trend.

FEAR & GREED INDEX:

“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffett.

Data courtesy of CNN Business as of Friday’s market close

The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.

Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.

Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.

A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.

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