The Iran war-driven surge in oil prices significantly impacted global markets last week, resulting in the S&P 500's first three-week losing streak in approximately a year [1]. Nine out of eleven S&P 500 sector indexes ended lower for the week, with energy and utilities being the only winners amid the turmoil [1]. Brent crude, the international benchmark, rose over 11%, while West Texas Intermediate crude climbed 8% during the past five trading sessions [1]. Notably, Brent settled above $100 for the first time since 2022 on Thursday, and both Brent and WTI briefly surged above $119 on Monday before retreating and then rising again [1]. The S&P 500 index fell 1.6% for the week [1].
Jim Cramer advised investors to avoid panic selling during the conflict, warning that exiting the market entirely could result in missing out on a potential rebound once the war subsides [1]. He recommended patience and highlighted the importance of timing, noting that the S&P Short Range Oscillator signaled an oversold market midweek, prompting selective buying [1]. The team added to their Procter & Gamble (PG) position on Wednesday and later purchased Alphabet (GOOGL) shares on Friday, following a shopping list of five stocks to buy [1]. Cramer suggested that if the Oscillator reaches minus-10%, it could historically mark an optimal buying opportunity, with oversold conditions beginning at minus-4% [1].
The spike in oil prices has overshadowed key economic reports, such as the consumer price index for February and the personal consumption expenditures price index for January, as both were released before the U.S. and Israel attacked Iran on February 28 [1]. The outlook for inflation is now clouded, with expectations that inflation will rise in the coming months and concerns about stagflation—higher prices with limited economic growth—growing among investors [1]. Some Wall Street analysts are referencing the 1970s stagflation period, when the S&P 500 dropped over 40% in a year during a recession and the OPEC oil crisis, as a cautionary tale [1].
CONCLUSION
The Iran conflict has caused a sharp rise in oil prices, leading to broad declines across most S&P 500 sectors and heightened concerns about inflation and stagflation. While some investors are cautiously buying oversold stocks, the market remains volatile and sensitive to developments in the Middle East. The potential for further volatility and inflationary pressures is likely to persist as long as the conflict continues.