S&P 500, Nasdaq Flat; Oil Falls Amid Iran War Concerns – March 13, 2026

Stock market activity remained muted Friday, as investors continued to assess the evolving geopolitical situation in the Middle East and its potential impact on global economic growth. The S&P 500 edged up 0.1%, even as the Nasdaq Composite held steady. The Dow Jones Industrial Average saw a more notable gain, rising 173 points, or 0.4%.

Oil Price Volatility and the Strait of Hormuz

Despite the modest gains in equities, the week has been marked by volatility, particularly in the energy sector. The S&P 500 is currently tracking for a 0.9% weekly decline, its first three-week losing streak in approximately a year. The Dow is poised for a 1.4% slide, and the Nasdaq has fallen 0.4% week-to-date. A key driver of this uncertainty has been the situation surrounding the Strait of Hormuz, a critical waterway for global oil shipments.

Oil prices, which spiked earlier in the week following statements from Iran’s modern Supreme Leader Mojtaba Khamenei regarding the potential closure of the Strait as a “tool to pressure the enemy,” reversed course on Friday. West Texas Intermediate crude futures retreated 0.5% to around $95 per barrel, and Brent futures edged down 0.1% to $100 a barrel. Brent had closed above $100 for the first time since August 2022 on Thursday.

Traffic in the Strait has been significantly disrupted since the U.S. And Israel launched strikes on Iran in late February, creating considerable anxiety among investors. However, Defense Secretary Pete Hegseth downplayed concerns about a prolonged closure, stating during a Pentagon briefing that the situation is being managed effectively.

Inflation Concerns and the Federal Reserve

Beyond the immediate geopolitical risks, investors are also grappling with concerns about rising oil prices and their potential impact on inflation. These fears have dampened expectations for Federal Reserve interest rate cuts in the coming months. Chris Toomey, managing director at Morgan Stanley Private Wealth Management, highlighted the confluence of factors creating headwinds for the market, including the buildout of artificial intelligence, the growth of private credit markets, and the energy situation. He specifically noted that a sustained disruption to the Strait of Hormuz – lasting two to three months or longer – would pose a “real problem.”

Economic Data and Shifting Expectations

Adding to the complexity, recent economic data has presented a mixed picture. Investors are weighing the latest figures from the Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index. In January, the PCE price index rose 0.3%, in line with expectations. Year-over-year, the headline reading increased 2.8%, slightly below the 2.9% forecast by economists polled by Dow Jones. Core PCE, which excludes volatile food and energy prices, also came in as expected, rising 0.4% for the month, and 3.1% year-over-year.

However, the latest estimate of fourth-quarter 2025 gross domestic product (GDP) growth was significantly lower than previously reported, coming in at an annual rate of just 0.7%. This revision was down from the prior estimate of 1.4% and well below the Dow Jones forecast of 1.5%, suggesting a slowdown in economic activity.

Sector Performance and Market Sentiment

The defensive posture adopted by investors is reflected in sector performance. While the overall market showed modest gains, certain sectors are experiencing more pronounced effects. Energy stocks, predictably, have been sensitive to the fluctuations in oil prices. Technology stocks, often considered growth-oriented, have faced headwinds due to rising interest rate expectations and concerns about a potential economic slowdown. The relative strength of the Dow Jones, driven by more established, dividend-paying companies, suggests a preference for value over growth in the current environment.

Looking Ahead: Key Factors to Watch

The coming days and weeks will be crucial in determining the trajectory of the market. Several key factors will be closely monitored. First, the scope and nature of any further retaliation by Iran will be paramount. Second, the operational status of the Strait of Hormuz will remain a critical focal point. Any prolonged disruption could lead to a significant spike in oil prices and exacerbate inflationary pressures. Finally, the Federal Reserve’s response to the evolving economic data and geopolitical risks will be closely watched. The central bank’s next policy meeting will be closely scrutinized for any signals regarding the timing and pace of future interest rate adjustments.

Investors will also be paying attention to corporate earnings reports, which will provide insights into the health of the underlying economy and the ability of companies to navigate the current challenges. The ongoing uncertainty underscores the importance of a cautious and diversified investment approach.