Wall Street Week Ahead: Inflation in focus for markets jostled by Middle East war signals

NEW YORK: A fresh read on inflation and initial company results next week could start to show the Middle East war’s effects on the US economy and corporate America, as investors hope to start moving past a conflict that has consumed markets.

Traders were wrestling with conflicting signals about a potential winding down of the war that began over a month ago, with the US-Israeli military strikes on Iran.

The S&P 500 posted a gain in the holiday-shortened week, snapping a five-week streak of losses. The benchmark index earlier in the week closed its worst-performing quarter since 2022, weighed down since late February by the war and the resulting surge in energy prices.

“It’s going to be hard to get the market’s attention off the Middle East, oil prices and the risks that have emerged,” said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments. “The markets have been so myopically focused on geopolitical risk and … how all this is going to shake out.”

Stocks have stumbled this year, with concerns about artificial-intelligence disruption and private credit weakness compounding uncertainty over the Middle East conflict. The S&P 500 was last down nearly 6 percent from its late-January all-time high.

The war’s impact on oil supplies and energy prices remained the focal point for investors, especially the status of the Strait of Hormuz, a critical Middle East oil-shipping channel where traffic has stalled.

US crude topped USD110 a barrel on Thursday after the commodity earlier in the week settled above USD100 a barrel for the first time since 2022.

“The market is pricing off oil,” said Doug Huber, deputy chief investment officer at Wealth Enhancement Group. “Inflation expectations, bond markets — everything is stuck to this concept of what oil is doing.”

Next week’s consumer price index, a closely watched inflation gauge, stands as an early test of the war’s energy shock. With US crude jumping some 90 percent since the start of the year, the US average gasoline price rose above USD4 a gallon this week for the first time in more than three years.

“We think the first stage of oil price pass-through will have arrived in March via motor fuel,” BNP Paribas said in a note previewing the CPI report.