Stocks Rebound Despite Rising Oil and Continued Middle East Tensions

US stocks ended their five week losing streak, managing to put together a solid week of gains with the S&P 500 rallying 3.36%. This came despite little progress on the war in Iran and happened the same time oil rose another 12% to finish the week at $112/barrel, a new four year high.

There were high hopes of a de-escalation of events and optimism about a potential offramp to the situation in the Middle East. Most of the first half of the week we heard, mainly from Trump’s Truth Social posts, that there were talks with the “new and more reasonable” Iran regime, that Trump was ready to wind down military operations, that a deal was possible, the war could end in 2-3 weeks, and that Iran wanted a ceasefire.

Between Tuesday and Wednesday, stocks posted their best two-day gain since May in anticipation of an official announcement by the President in his address to the nation Wednesday evening.

However, Trump offered nothing new in the address, and optimism deteriorated toward the end of the week after Trump said that attacks on Iran will continue and the US would strike its power plants and other energy infrastructure if no ceasefire agreement is made and the Strait of Hormuz is reopened. The situation remains unknown and until there is an end we expect continued volatility.

Despite arguably the most uncertainty markets have faced since last year’s tariff announcement, stocks are down just 6% from the highs in January. There may be several factors keeping the markets more stable than most had expected.

Even though the price for oil has doubled since pre-war, it appears the risks to inflation remain unchanged. Federal Reserve Chairman Jerome Powell emphasized this matter during his comments in Q&A at Harvard University early last week. Several of Powell’s remarks leaned more dovish, especially when compared the press conference following the Fed meeting three weeks ago. Powell said inflation expectations remain well anchored and monetary policy is in a “good place for us to wait and see” before making moves on interest rates.

Recall, over the past several months the futures market for interest rates have been increasing the likelihood the Fed would raise interest rates by the end of the year. It was as recent as March 26 that futures markets were putting higher odds on two rate hikes this year than one rate cut, a stark difference from two rate cuts that were expected before the Iran conflict. 

After seeing a sizeable increase since the start of the Iran conflict, Treasury yields moved lower last week, following Fed rate expectations. The 2-year Treasury yield moved from 3.45% up to 4.00% at its peak on March 26, but fell back below 3.80% last week.

Another reason stocks are holding up relatively well is the fact economic data has remained quite strong and the economy has been carrying a bit of momentum. Last week saw several data reports on the labor market as well as retail sales. After a weak January (likely weather related), retail sales bounced back strongly in February with a 0.6% increase, the best month since July.

When it comes to the labor market, jobs appear to be pretty stable with data continuing to support a “low hire, low fire” economy. Job openings, calculated the last business day of each month, have leveled off after spiking from the post-pandemic economic reopening and have since remained at pre-pandemic levels for nearly two years.

On Friday the DOL released March payroll figures that showed payrolls increased 178,000 in the month, triple expectations and much better than the 133,000 payrolls lost in February (which may be due to one-time factors like weather). The government continues to shed jobs, losing another 8,000 in March (now 269,000 less jobs from the peak mid-2025).

In addition, investors may be looking past the situation in the Middle East and instead remain focused on profits and fundamentals. Earnings for US stocks, which are expected to grow at a double-digit pace, are basically unchanged since February, before the start of the war in Iran.

That could quickly change in a couple weeks as companies begin reporting first quarter earnings next week and will likely include new guidance for this year, or updated guidance based on the higher uncertainty and recent rise in oil/input prices.

Before that, this week the inflation report for March is the most notable item on the calendar. The consumer price index scheduled to be released on Friday is expected to post a much higher number than the recent trend as oil and energy prices spiked during the month. The index is expected to increase 0.9%, with the core index (excluding food and energy) expected to increase 0.3%.

Geopolitics will remain the big story this week with Trump’s deadline for Iran Tuesday. Trump is consistent with his approach to his agenda – high pressure and escalating a situation to force negotiation and a deal. However, Iran does not appear ready to concede. We expect the uncertainty on what comes next to keep volatility elevated. 

Week in Review:

Oil remains one of the big stories with the price per barrel seeing its largest monthly increase since 2020, rising 51% in the month. Oil was up 11.94% for the week. Typically, higher oil would coincide with lower stock prices, but stocks were higher last week on hopes of a ceasefire deal with Iran. The four major US stock indices finished as follows: Nasdaq +4.44%, S&P 500 +3.36%, Russell 2000 +3.28%, and Dow +2.96%. Treasury yields moved lower, following rate cut expectations. The 2-year Treasury yield fell 10 basis points to 3.83% while the 10-year yield fell 12 basis points to 4.32%. The dollar index was stable, down just 0.12%, gold rose 3.55% but remains well off the highs from January, while Bitcoin increased 0.89%. 

Recent Economic Data



• ADP Payrolls: ADP reported a 62,000 increase in the number of private payrolls in March, relatively in line with expectations and the same increase that was seen in February. The report said the smallest employers drove most of the job gains, and says overall hiring is steady, but job growth continues to favor certain industries like health care.

• Job Openings and Labor Turnover Survey: The number of job openings the last day of February was 6.882 million, falling 358k from the prior month. Job openings have trended lower since peaking at over 12 million in early 2022 and appear to have found a new trend around the upper 6 million to low 7 million range which is similar to the pre-pandemic trend. However, the number of hires fell to the lowest since the pandemic at 4.849 million, down about 400k from a year ago. At the same time, the number of separations fell slightly with the number of layoffs holding steady at 1.721 million. Data continues to point to a low hire, low fire economy.

• Jobless Claims: The number of unemployment claims the week ended March 28 fell another 9,000 to 202,000, with the four-week average down 3k to 207,750. The number of continuing claims increased 25k to 1.841 million with the four-week average down 8k to 1.839 million. Over the past four months, claims have been back near some of the lowest levels of the post-pandemic era.

• PMI Manufacturing Index: The PMI manufacturing index was 52.3 for March, right in line with consensus expectations and matching February’ index level, indicating manufacturing activity continued to grow at a moderate pace even through the uncertainty surrounding Iran. However, the report noted it in part reflected customers stock building due to the Iran war. Production was higher amid an upturn in overall sales, while confidence in the outlook was little changed. Employment grew only fractionally while prices accelerated again.

• ISM Manufacturing Index: The ISM manufacturing index was 52.7 for March, slightly more than February and in line with expectations, indicating growing activity for the third consecutive month. In fact, it is the first time the index has been in expansion territory (over 50) for three consecutive months since 2022. New orders slowed but production grew, while employment fell. Respondents cited the Iran war as a new impact to business along with US economic policy.

• Trade Balance: The trade deficit for February was relatively unchanged from January, with the US importing $57.3 billion more than it exported (versus $54.7 billion in January). The slightly higher deficit was due to a 4.3% or $15.2 billion increase in imports (to $372.1 billion), while exports increased 4.2% or $12.6 billion (to $314.8 billion). Despite trade activity being up a solid 4.2% in February, or $27.8 billion, it was up a sluggish 0.9% over the past year.  

• S&P Case Shiller Home Price Index: The S&P Case Shiller home price index suggested home prices continued to increase in January, albeit at a much slower pace than recent years. The price index increased 0.2% in the month (on a seasonally adjusted basis, falling 0.1% excluding seasonal factors). Over the past year, the index is up just 0.9%, the slowest annual increase since mid-2023. The last 12 months was also split – the first six months saw prices increase 2.2% while the last six saw prices fall 1.3%. The Northeast and Midwest regions continue to see the highest price gains, although slowing, with Chicago and Cleveland areas the highest at 4.6% and 3.6%, while the West and South are seeing overall price declines – Tampa down 2.5% and Denver down 2.1%.

• Consumer Confidence: The consumer confidence index was 91.8 for March, a little better than February and better than expected despite the war in Iran. The present situations index improved five points to 123.3, while the expectations index fell 1.5 points to 70.9. Though it was a slight increase in the month, the index has remained in a downtrend since 2021, with confidence just above the lows from the tariff announcement one year ago.

• Retail Sales (Delayed): There was $653.48 billion in retail sales in February, a solid 0.6% increase in the month, the best growth since July, potentially a bounce back after a weak weather-related January. Of the 13 major categories, 10 of them saw increasing sales in the month. Vehicle sales increased 1.2% while gasoline sales were up 0.9%. Excluding these two volatile categories, sales were up 0.4%. Grocery and furniture stores were the only two retail categories seeing lower sales in the month. Sales are up 3.7% from a year ago and when accounting for inflation of 2.4%, real retail sales grew 1.3%. 

Company News



• McCormick & Company: The spices, seasoning, condiments/etc company McCormick confirmed it has agreed to combine with Unilever’s food business in a deal valuing Unilever’s business at $44.8 billion. The combined company is expected to realize $600 million in annual cost synergies. Unilever shareholders will receive shares equaling 65% of McCormick stock, equivalent to $29.1 billion and $15.7 billion in cash. McCormick shareholders will own 35%, Unilever shareholders will own 55.1%, while Unilever will own 9.9% of the combined company.

• Marvell Technology: Shares of Marvell Technology were up over 10% after it announced it has entered into a strategic partnership with Nvidia, where Nvidia will be investing $2 billion into the company and both will offer advanced products to each other.

• Novo Nordisk: Wegovy maker Novo Nordisk announced it will offer a new multi-month subscription program for its weight loss drug to provide eligible self-pay patients a lower, predictable monthly price when enrolled in the program through a telehealth provider. The program is intended to help reduce the cost uncertainty and help people start and stay on an FDA-approved obesity treatment, the company said.

• Eli Lilly: The FDA has approved the second weight loss drug in a pill format, approving Eli Lilly’s GLP-1 Foundayo, after approving Novo Nordisk’s Wegovy pill in January. Eli Lilly said it will start accepting applications for the drug through its LillyDirect website, costing $149 for cash paying customers, with the first shipments beginning next week. it will soon be available through telehealth providers.

• Apple: Bloomberg reported Apple is working on a new feature for its new redeveloped Siri assistant, speculated to be released when Apple unveils its iOS27 later this year, that would allow it to handle multiple tasks with a single prompt from the user, versus the current method where users make separate requests per each task needed.

• Oracle: Oracle has reportedly begun the process of laying off thousands of employees to drive down costs to help support the buildout of its AI infrastructure. An email obtained by Business Insider was sent to employees Tuesday notifying those affected that their role has been eliminated as “part of a broader organizational change.” Several analysts are estimating 30,000 jobs could be eliminated, out of the 162,000 employees at Oracle.

• SpaceX: Bloomberg reported that SpaceX has confidentially filed for an IPO (initial public offering – one of the first steps to going public), putting it on schedule to list in around June. It was previously reported the company could see a valuation of $1.75 trillion which would make it one of the top 10 largest companies in the world, with an IPO raising as much as $75 billion.

Other News



• Alternative Investments in 401K’s: The Trump Administration and the Department of Labor issued a proposal rule to make alternative investments available in 401k plans, like private credit, private equity, cryptocurrencies, and real estate, following through on an executive order issued by Trump last year. The proposed rule includes steps managers can take when considering alternative investments in investment lineups. Industry groups have argued these additional investments could offer diversification and enhance long-term returns, while skeptics say they bring higher fees, complexity, and limited liquidity, creating more risks for retirement savers.

• Proposal to End Quarterly Disclosures: Bloomberg reported the SEC’s (Securities and Exchange Commission) proposal to end quarterly disclosure requirements for public companies, and instead require semi-annually, is under review at the White House. If it moves past this step, the SEC can vote to release the proposal for public comment before voting on a final version. Arguments for the change include the possibility it increases the number of public companies and forces a more long-term view, while opponents say it reduces transparency.

• OPEC Production Increase: In its monthly meeting, the Organization of the Petroleum Exporting Countries (OPEC), led by key producers Saudi Arabia and Russia, agreed to increased oil production targets for May by 206,000 barrels per day. The group said the conflict in the Middle East and the damage to energy assets will have a prolonged impact on oil supply, even are the war ends. The production increase is largely symbolic, as the exports from the Persian Gulf are essentially halted, but it may signal the group’s intention to raise production once the conflict ends. 

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