Stocks ended lower on Friday, erasing early session gains and concluding a week marked by investor anxieties over slowing economic growth coupled with persistent inflation concerns. The escalating conflict in the Middle East, particularly involving Iran, further complicated the outlook as it catalyzed fears of economic instability.
The Dow Jones Industrial Average slipped 0.3%, while the S&P 500 declined by 0.6%, and the Nasdaq Composite saw a more significant drop of nearly 1%. Notably, all three major indices recorded their third consecutive week of losses.
Renewed worries about inflation, exacerbated by rising oil prices, shifted traders’ expectations regarding Federal Reserve policy. Following recent data, market participants have adjusted predictions about potential interest rate cuts this year. Although the central bank was previously thought to be on course for cuts, the latest inflation developments have tempered these views significantly.
Oil prices surged significantly due to the mounting conflict in the Middle East. On Friday, West Texas Intermediate crude rose by 2%, reaching $98 per barrel, while Brent crude reclaimed the $100 per barrel mark. This spike in prices has had a destabilizing effect on financial markets and raised fears about the broader implications for inflation.
Recent economic data released on Friday gave further insight into the state of the economy. The Personal Consumption Expenditures (PCE) index indicated that headline prices increased by 0.3% in January compared to the previous month, while the core PCE, which strips out the more volatile food and energy prices, remained unchanged with a 0.4% rise month-over-month. Additionally, the Bureau of Economic Analysis revised its estimate for the U.S. gross domestic product (GDP) for the fourth quarter of 2025 down to a mere 0.7% growth from a prior reading of 1.4%.
Consumer sentiment has also taken a hit, with preliminary figures for March revealing the lowest sentiment level recorded so far this year, reflecting concerns over the economy amidst soaring gas prices. Additionally, the Job Openings and Labor Turnover Survey (JOLTS) revealed that job openings ticked up slightly in February, offering a glimmer of positivity in an otherwise bleak economic picture.
As the day progressed, stocks moved further down, with increased risk-off sentiment permeating the market. Defensive sectors like utilities and real estate were among the few to show gains, while technology and materials sectors faced declines.
In political news, a federal judge dismissed subpoenas from the Justice Department aimed at Jerome Powell, the Federal Reserve Chair, related to his testimony regarding the central bank’s headquarters renovations.
Amid the turmoil, energy markets have been notably impacted by the geopolitical situation. Reports indicate that Iranian oil shipments continue despite traffic through the Strait of Hormuz being nearly at a standstill, with significant shipping disruptions persisting. This ongoing unrest has prompted discussions regarding U.S. Navy escorts for vessels in the area, although this would cover only a fraction of typical maritime traffic.
The outlook remains uncertain as the Federal Reserve navigates these complex dynamics amid inflationary pressures and geopolitical instability, with traders maintaining a cautious stance as they await further developments.
