By Antonio Di Giacomo, Senior Market Analyst at XS.com
Wall Street began Friday’s session on a positive note but quickly lost momentum and moved back into negative territory after several days of selling pressure. Major U.S. indexes declined after three consecutive losing sessions, reflecting investor caution amid a deteriorating geopolitical outlook and new signals on the inflation front. The S&P 500 was down around 0.4%, while the tech-heavy Nasdaq fell roughly 0.8%. Meanwhile, the Dow Jones Industrial Average posted a more moderate decline of about 0.1%. This weakness comes as markets adjust positions following the strong performance seen in previous months.
At the same time, oil prices recovered part of their initial losses. Developments in the energy market remain closely tied to the evolution of the conflict in the Middle East, where escalating tensions have raised concerns about potential disruptions to global crude supply.
Investors also analyzed new U.S. inflation data that came in line with market expectations. However, these indicators reflect backward-looking information and do not yet fully incorporate the potential impact of the recent surge in oil prices following the military attacks by the United States and Israel against Iran.
The rise in energy prices could become a significant factor in the inflation outlook in the coming months. Sustained increases in oil prices tend to feed through to transportation, production, and consumer costs, which could complicate the Federal Reserve’s efforts to sustain a stable disinflation process. Geopolitical tensions have become the main source of uncertainty for global markets. The conflict with Iran continues to escalate and shows no clear signs of a short-term resolution. Iranian authorities have warned they could close the Strait of Hormuz, a strategic route through which nearly 20% of the world’s oil supply passes. In response to this scenario, the United States has adopted several measures to stabilize global energy supply. These include temporarily allowing some countries to purchase sanctioned Russian oil and considering deploying naval escorts to protect commercial vessels transiting the region. Additionally, Washington has intensified its military pressure on Iran, stating that attacks have been carried out against more than 15,000 targets linked to strategic
and military infrastructure. This increase in military operations raises the risk of a broader regional escalation, keeping financial markets highly sensitive to any new developments. At the same time, investors remain focused on U.S. monetary policy. A scenario of higher energy price volatility and additional inflationary pressures could delay the start of an interest rate-cutting cycle, directly affecting the valuation of financial assets. In conclusion, the combination of geopolitical tensions, inflation uncertainty, and shifting expectations for monetary policy is creating a more volatile environment in financial markets. As the conflict in the Middle East continues to evolve, investors will remain attentive to any signals that could affect global energy supply, inflation dynamics, and ultimately the direction of economic policy in the United States.
