Global markets enter a crucial data stretch with investors closely watching next week’s U.S. jobs report amid a conflict in the Middle East that has already tightened energy markets. The standoff has removed a significant share of oil supply, sending U.S. crude prices higher and increasing pressure on consumer-facing costs and financial conditions.
U.S. crude has climbed more than 60% year-to-date to hover near $100 a barrel, and gasoline prices have risen to about $4 a gallon. Those increases present a potential headwind to household spending, a concern that has been reflected in market behavior and benchmark yields.
Market backdrop
Benchmark Treasury yields have surged, reaching levels not seen since last summer as investors grow more concerned about inflation risks. That rise in yields is creating a strain on equity valuations, with the S&P 500 and the Nasdaq Composite retreating in recent weeks.
Sharp declines late in the week have put the S&P 500 on track for a fifth consecutive weekly drop, leaving the index down nearly 6% since U.S.-Israeli military strikes on Iran began in late February. The Nasdaq Composite closed more than 10% below its October high, confirming a correction for that index.
Market participants were whipsawed during the week by contradictory signals about the potential for de-escalation in the conflict, a pattern that analysts expect will keep asset prices sensitive to headlines.
"Any signs of positive breakthroughs in terms of discussions with Iran and a cessation of the conflict there would go a long way towards providing some reassurance to investors and a boost in sentiment," said Jim Baird, chief investment officer with Plante Moran Financial Advisors. "Anything that would lead to indications that this might become more long and drawn out, that would be a negative for investor sentiment and certainly would weigh on the market."
Tuesday marks the end of a difficult first quarter for U.S. equities. Beyond geopolitical tensions, markets have also been rattled by concerns over business disruptions tied to artificial intelligence and strains in the private credit market. The S&P 500 is down more than 5% so far in 2026 after three consecutive years of robust double-digit gains.
"There’s a lot of uncertainty out there overall," said James Ragan, co-CIO and director of investment management research at D.A. Davidson. "So as we get into the last couple of days of the quarter, I just think you could see the market sentiment kind of rolling over a little bit."
The payrolls report and other data
The March payrolls report, due on April 3 when U.S. stock markets will be closed for the Good Friday holiday, is expected to show an increase of about 48,000 jobs and an unemployment rate of 4.5%, according to Reuters data. That follows a surprisingly weak February figure that recorded a decline of 92,000 jobs.
Given that two of the past three monthly reports showed negative job growth, some market observers say even a modest positive reading would be welcomed by investors.
Other reports due next week include retail sales for February and manufacturing and services activity surveys, which together will give investors a wider view of U.S. demand and production trends entering the second quarter.
Monetary policy considerations
Worries about a weakening labor market prompted the Federal Reserve to cut interest rates last year. But rising energy prices complicate the central bank’s path forward: inflation remains above the Fed’s target and higher oil costs could make further rate reductions more difficult.
Markets have adjusted their outlook accordingly. Fed funds futures show investors currently expect no additional rate cuts this year, and they even assign a modest chance of a rate hike in 2026, according to LSEG data as of Thursday.
Yields, valuations and corporate profit concerns
The benchmark 10-year Treasury yield has climbed to about 4.4% from roughly 4% before the outbreak of hostilities in the region. That increase is front of mind for equity investors weighing the broader economic impact.
"The equity market is also taking very careful notice" of the rise in yields, said David Bianco, Americas chief investment officer at DWS. "This affects so many things," he said, citing effects on mortgages, U.S. government debt sustainability and what constitutes a fair price-to-earnings valuation.
Market multiples have come down in recent weeks. The S&P 500’s price-to-earnings ratio, based on earnings estimates for the next 12 months, was last just under 20, down from over 22 at the start of the year. That P/E ratio remains above its long-term average of 16.
Investors are trying to assess how rising fuel and other cost pressures will affect corporate profits. Some firms facing higher operating expenses have issued reports that reassured investors; among those cited were Delta Air Lines and FedEx. Nike is scheduled to report quarterly results on Tuesday, while the bulk of first-quarter earnings are expected in a couple of weeks.
"I think the U.S. economy remains a safe distance from recession," Bianco said. "We can debate the odds of recession going up as oil prices go up, but I still think we are a safe distance from a recession being likely."
What to watch
- March payrolls and the unemployment rate, which will influence Fed expectations and investor risk appetite.
- Retail sales and activity surveys for signals on consumer spending and business momentum.
- Geopolitical developments in the Middle East, which continue to influence oil prices and broader market sentiment.
With markets sensitive to headlines and a cluster of important economic data imminent, investors will be parsing each release for clues on growth, inflation and the trajectory of monetary policy as the quarter closes.