Categories:
Key areas of focus
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The Iran conflict and its impact on oil prices will likely remain the primary focus for markets. On the economic front, attention shifts to this week’s Fed meeting, with a policy statement due Wednesday afternoon. Rate futures suggest a 99% probability the Fed leaves rates unchanged. Investors will also watch several data releases, including the Philly Fed survey, February Industrial Production, New Home Sales, and the latest Producer Price Index (PPI).
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Inflation remains stubbornly above the Fed’s 2% target. Core PCE, the Fed’s preferred inflation gauge that excludes food and energy, rose 3.1% year-over-year in January, slightly above December’s 3.0% reading. On a month-to-month basis, prices increased 0.4%. Inflation pressures were already proving sticky before the recent oil spike, and Oxford Economics estimates the Iran conflict could add roughly 0.3 percentage points to headline inflation through higher gasoline prices.
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Economic growth slowed more than previously reported late last year. Revised data showed GDP grew at a 0.7% annualized pace in the fourth quarter, down from the earlier 1.4% estimate and significantly below the 4.4% growth rate recorded in the third quarter.
Week in review
Markets finished the week lower as investors continued to digest elevated oil prices and rising interest rates. Markets remained focused on energy prices and developments in the Middle East. Oil briefly moved above $100 per barrel on Monday before pulling back, pushing equity markets lower. Sentiment improved Tuesday as oil prices retreated following comments from President Trump suggesting the Iran conflict may not last long and reports that G7 countries could release oil from strategic reserves if necessary. Stocks rallied, with real estate also benefiting from stronger-than-expected existing home sales. Markets turned lower again midweek despite an in-line February CPI report. Core CPI rose 2.46% year-over-year, although investors remained focused on the inflationary implications of higher oil prices. By Thursday, markets weakened as oil moved back toward $100 and rates rose despite some encouraging economic data. Housing starts rose, the trade deficit narrowed on strong gold exports, and jobless claims declined. Friday’s data was mixed, including a downward revision to GDP and Core PCE rising to 3.1%, its highest level in nearly two years, while consumer sentiment declined less than expected.
Spotlight
Oil was the dominant story for markets last week as the Iran conflict continued and shipping through the Strait of Hormuz remained heavily restricted. According to the World Economic Forum, the disruption has effectively removed roughly 15% of global oil supply from the market. Coordinated releases from Strategic Petroleum Reserves (SPR) helped pull prices down from last weekend’s spike near $120 per barrel. However, those efforts are limited by how quickly that oil can reach the market. As a result, oil prices have steadily climbed back above $100. At the start of the week, markets briefly priced in the possibility that Middle East supply disruptions might ease quickly. That optimism has faded as investors reassess how long the Strait of Hormuz may remain constrained and how much global reserves can realistically offset the supply shortfall. The bigger question continues to be what sustained higher oil prices mean for the economy. Higher energy costs typically push inflation higher while weighing on growth and delaying the Fed’s ability to cut rates.
Markets
Sectors
Style & Market Cap
Sources
1. Existing Home Sales
National Association of REALTORS (NAR), Existing-Home Sales Summary, retrieved from NAR; https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales
2. Core Inflation (CPI)
U.S. Bureau of Labor Statistics, Consumer Price Index Summary, retrieved from U.S. Bureau of Labor Statistics; https://www.bls.gov/news.release/cpi.nr0.htm
3. Housing Starts
United States Census Bureau, Monthly New Residential Construction, retrieved from U.S. Census, https://www.census.gov/construction/nrc/current/index.html
4. Trade Deficit
Bureau of Economic Analysis, International Trade in Goods and Services, retrieved from BEA, https://www.bea.gov/data/intl-trade-investment/international-trade-goods-and-services
5. Jobless Claims
U.S. Department of Labor, Unemployment Insurance Weekly Claims, retrieved from U.S. Department of Labor; https://www.dol.gov/ui/data.pdf
6. Fourth Quarter Gross Domestic Product (GDP)
Bureau of Economic Analysis, GDP (Second Estimate), 4th Quarter and Year 2025, retrieved from BEA, https://www.bea.gov/news/2026/gdp-second-estimate-4th-quarter-and-year-2025
7. Personal Consumption Expenditures Price Index (PCE)
Bureau of Economic Analysis, Personal Consumption Expenditures Price Index, retrieved from BEA, https://www.bea.gov/data/personal-consumption-expenditures-price-index
8. Consumer Sentiment
Surveys of Consumers, University of Michigan Consumer Sentiment Index Summary, retrieved from University of Michigan, https://www.sca.isr.umich.edu/
9. World Economic Forum Estimate
International Energy Agency (IEA), Oil Market Report – March 2026, retrieved from IEA, https://www.iea.org/reports/oil-market-report-march-2026
Morningstar Direct using Morningstar Indices
Authors:
Anthony Silva, CFA®
Senior Director of Strategy Management
World Investment Advisors, LLC