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Investors are heading into a critical week for U.S. markets, with upcoming inflation data and early corporate earnings expected to provide the first clear signals of how the Middle East conflict is impacting the economy and corporate performance.
Markets Seek Direction After Volatile Quarter
The S&P 500 ended the shortened trading week on a positive note, snapping a five-week losing streak. However, the benchmark index still recorded its worst quarterly performance since 2022, as markets have been under pressure since late February amid surging energy prices and geopolitical uncertainty.
The index remains down nearly 6% from its late-January record high, reflecting a challenging environment shaped by multiple headwinds, including concerns over artificial intelligence disruption, private credit risks, and the ongoing conflict.
Energy Shock Remains Central Risk
The war’s impact on global oil supply continues to dominate market sentiment, particularly with disruptions around the Strait of Hormuz.
U.S. crude oil prices have surged above $110 per barrel, after reclaiming the $100 level earlier in the week for the first time since 2022. Since the start of the year, oil prices have climbed roughly 90%, significantly increasing inflationary pressures.
U.S. gasoline prices have also crossed $4 per gallon for the first time in more than three years, adding strain on consumers and raising concerns about broader economic impacts.
Inflation Data in Focus
Next week’s consumer price index (CPI) report will serve as an early test of the energy-driven inflation shock. Economists expect March CPI to rise 0.9% month-on-month, while core inflation—excluding food and energy—is projected to increase 0.3%.
Investors will be closely watching for signs of “second-round effects,” where higher energy costs begin to filter through to other goods and services. However, some analysts caution that March data may be too early to fully capture the broader inflationary impact of the conflict.
Rate Expectations Shift
Rising inflation concerns have already prompted markets to scale back expectations for interest rate cuts this year. Higher energy costs and persistent price pressures are increasing the likelihood that monetary policy will remain restrictive for longer.
Additional insights are expected from the upcoming release of Federal Reserve meeting minutes, which could provide further clarity on the central bank’s outlook.
Earnings Season Kicks Off
Attention is also turning to the start of the earnings season, which could play a crucial role in shaping market direction. Investors are hoping that strong corporate results will help offset macroeconomic and geopolitical risks.
Among the early reporters, Delta Air Lines and Constellation Brands are set to release results next week, offering initial insights into how companies are navigating rising costs and shifting demand conditions.
Overall, S&P 500 companies are expected to deliver a 14.4% year-on-year increase in first-quarter earnings, according to market estimates.
Market Outlook
The coming week represents a key inflection point for markets. Inflation data and corporate earnings will begin to reveal the real economic impact of the Middle East conflict, particularly through energy prices and consumer behavior.
With uncertainty still elevated, investors are likely to remain cautious, closely monitoring both macroeconomic indicators and geopolitical developments for direction.
