U.S. equity markets ended positive on the week as investors grew increasingly optimistic that diplomatic negotiations between the U.S. and Iran could eventually lead to a reopening of the Strait of Hormuz and ease pressures on global energy markets. While trading remained highly volatile throughout the week, the S&P 500 posted its eighth consecutive weekly gain, its longest winning streak since 2023.
Markets continued to react sharply to headlines surrounding the Middle East conflict as oil prices fluctuated throughout the week based on the perceived likelihood of a diplomatic resolution. Brent crude briefly traded above $110 per barrel earlier in the week before retreating below $100 by Friday as negotiations appeared to make incremental progress. Despite the pullback in oil prices, investors remained concerned that prolonged disruptions to energy flows through the Strait of Hormuz could continue fueling inflationary pressures globally.
Minutes from the Federal Reserve’s most recent policy meeting revealed growing concern among policymakers regarding the persistence of inflationary pressures, particularly those stemming from elevated energy prices and the potential secondary effects on broader consumer prices. Several Fed officials noted that if inflation continues to run above target levels for an extended period, additional policy tightening may ultimately be required. While the Committee emphasized a willingness to remain patient as the economic effects of the Middle East conflict become clearer, markets interpreted the minutes as more hawkish than expected, contributing to upward pressure on Treasury yields throughout the week.
