Stock markets took another beating on Friday as a fresh surge in oil prices dampened any remaining hopes on Wall Street that the Federal Reserve might cut interest rates this year. With the ongoing conflict with Iran casting a long shadow over the global economy, the S&P 500 dropped 1.5 per cent, marking its fourth consecutive weekly loss— the longest such slump in over a year. The Dow Jones Industrial Average shed 470 points, while the Nasdaq composite tumbled by 2 per cent.
The decline intensified as oil prices, which had dipped early in the day, climbed sharply in the afternoon. Brent crude, the international benchmark, rose by 3.3 per cent to settle at $112.19 per barrel, while US crude gained 2.3 per cent to reach $98.32. These spikes are fuelling fears of long-term inflation, driving bond yields significantly higher. The 10-year Treasury yield jumped to 4.39 per cent, a move that threatens to make mortgages and corporate borrowing more expensive, further slowing economic growth.
The shift in sentiment has been so dramatic that traders have virtually abandoned bets on a rate cut this year. Some analysts are even beginning to whisper about the possibility of a rate hike in 2026— a scenario that seemed impossible before the war began. Ann Miletti of All spring Global Investments noted that while a hike would be "market shaking," sustained high oil prices might eventually drag the economy down so much that the Fed would be forced to stay its hand. This lack of movement on rates comes despite vocal demands for cuts from President Donald Trump, and mirrors a cautious stance from central banks in Europe, Japan, and the UK, all of which held rates steady this week.
The volatility has been particularly brutal for individual stocks. Super Micro Computer saw its shares plummet by 31.6 per cent following US government allegations that its staff conspired to smuggle advanced Nvidia chips to China. Although the company is cooperating with the investigation and has suspended the employees involved, the news weighed heavily on the broader market. Smaller companies, which are often more sensitive to interest rate pressures, also felt the squeeze, with the Russell 2000 index falling 2.5 per cent.
While the US market has historically shown resilience in the face of Middle Eastern conflicts, experts warn that the current situation is reaching a "red-flag" point. If oil prices remain at these levels for another few months, the ability of businesses to adapt to the "new normal" will be severely tested. For now, the carnage isn't limited to New York; European and Chinese indexes also saw sharp declines, reflecting a global sense of unease as the Persian Gulf remains a tinderbox.
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