Energy markets dominated the week’s narrative as escalating conflict in the Middle East sent oil prices sharply higher and renewed fears over inflation and global market stability.
The dominant headline this week was the escalation of conflict in the Middle East.
The U.S. and Israel launched large – scale strikes against Iran, leading to the effective closure of the Strait of Hormuz.
Oil Shock
Brent crude saw a historic spike, jumping 36% in the first week of fighting and touching $120/barrel before easing slightly on news of potential G – 7 reserve releases.
Global Impact
The closure of the Strait, which handles ~20% of global oil and gas, has sent gas prices in the U.S. toward $3.50 – $3.90 per gallon, reigniting inflation fears just as they were beginning to cool.
📈 Trading & Markets
Markets have been exceptionally volatile, with the VIX (Fear Gauge) spiking to 29.5 – its highest level since last spring.
| Index / Asset | Performance Highlight |
| S&P 500 | Retreated ~2.0% as stagflation fears outweighed strong Q4 earnings growth (14%). |
| Nasdaq | Down ~1.2%, though tech showed some resilience compared to energy – sensitive sectors. |
| Gold | Trading near $5,180/oz, serving as a classic safe – haven amid the chaos. |
| 10 – Year Treasury | Yields climbed back above 4.1%, reflecting expectations of “higher for longer” rates. |
| Bitcoin | Held relatively steady near $67,000 – $68,000, acting more like a digital gold than a risk asset this week. |
Sector Spotlight: AI & Private Credit
While the “AI trade” saw a brief relief rally led by firms like NVIDIA and Marvell, the software sector remains under pressure. Concerns are growing that AI disruption might make certain software models obsolete, causing the S&P 500 Software index to drop 30% from its October peak. This has spilled into Private Credit, with major funds like BlackRock limiting redemptions to 5% due to high withdrawal requests.
🏦 Central Bank & Economic Data
The “NFP Miss” last Friday (a loss of 92k jobs in February) set a somber tone for the week.
- The Fed’s Dilemma: Chairman Powell and the Fed are now caught between a cooling labor market (which suggests a need to cut rates) and the energy – driven inflation spike (which suggests a need to keep rates high).
- Rate Cut Hopes: Markets have drastically pared back expectations. The odds of a June rate cut fell from 57% to 33% this week.
- Upcoming Focus: All eyes are on next week’s Reserve Bank of Australia (RBA) meeting, where a pre – emptive rate hike is now expected to combat the energy shock.
Key Takeaway for Traders
The transition from “AI-driven growth” to “Geopolitical Risk” has shifted the playbook. Investors are currently favoring U.S. energy independence and defensive tech over European and Asian markets, which remain highly vulnerable to imported energy disruptions.
