U.S. equity markets closed lower on Friday, capping a week of losses that were driven in large part by a sharp jump in crude oil prices and disappointing labor market data.
The Dow Jones Industrial Average ended the day down 453.19 points, or 0.95%, at 47,501.55 after an earlier intraday drop that neared 950 points. The S&P 500 fell 1.33% to 6,740.02, while the Nasdaq Composite lost 1.59% to finish at 22,387.68.
Energy markets were a central source of the market’s volatility. West Texas Intermediate crude pushed above $90 per barrel and finished the week up roughly 35% - the largest weekly percentage gain since oil futures began trading in 1983. Prices rallied after U.S. President Donald Trump wrote on Truth Social that there would be no agreement to end the U.S.-Iran war without an "unconditional surrender" from Iran.
Analysts at RBC Capital Markets cautioned that the length of the conflict will be a determining factor for energy prices. "We believe that duration will be the determining factor of the ultimate price trajectory for energy. With no clear definition of what winning looks like, it is hard to forecast whether this will be a multi-week or multi-month conflict," strategists led by Helima Croft wrote.
Equity sentiment was also dented by a weak labor report. The Bureau of Labor Statistics said nonfarm payrolls fell by 92,000 in February, a sharp contrast to January’s downwardly revised gain of 126,000. That result missed economists’ expectations for a 50,000 increase, according to a Dow Jones survey. The unemployment rate rose slightly to 4.4% from 4.3%.
For the week, the S&P 500 was down about 2%, the Dow slipped 3%, and the Nasdaq declined about 1.2%.
What investors will watch this week
Market participants will be closely following developments in the Middle East to assess whether the conflict widens and to gauge potential disruptions to global energy supplies. The scale and persistence of any supply shock remain critical inputs for equity and inflation outlooks.
On the economic calendar, the February consumer price index is due on Wednesday. Economists surveyed by Reuters expect CPI to increase 0.2% month-on-month. Some market participants note that a benign CPI reading could be seen as less informative because the data largely covers the period before the recent escalation in the Middle East. Conversely, an upside surprise might exacerbate fears of energy-driven inflationary pressure.
Those inflation worries have already pushed back expectations for the Federal Reserve’s next policy easing. Still, the weak jobs report on Friday revived some market-implied odds of easing: pricing data from LSEG indicated about a 45% probability of at least a 25-basis-point cut at the Fed’s June meeting.
RBC’s rates strategists expect no rate cuts in 2026 but foresee a few reductions in 2027. Meanwhile, strategists led by Lori Calvasina at RBC highlighted that if their forecast of no cuts in 2026 proves accurate, the impact on the S&P 500 outlook would be modest. "If RBC’s forecast for no more cuts in 2026 is right, this would have a minimal impact on our S&P 500 outlook, as S&P 500 moves tend to be slightly stronger (17.7%) when the Fed does nothing in a 12-month time frame," they wrote.
Earnings and sector dynamics
The fourth-quarter earnings season is winding down, with only a handful of S&P 500 companies yet to report. The index is positioned to record its fifth straight quarter of double-digit year-over-year profit growth.
A robust report from Nvidia was among the final major technology company results, highlighting continued heavy spending on specialized AI chips. Earnings momentum in technology has been an important driver behind the recent profitability performance.
This week, investors will pay attention to results from Hewlett Packard Enterprise, Oracle, and Adobe, among others.
Analysts’ views on the near-term and medium-term outlook
Several investment firms shared perspectives on the market backdrop and potential scenarios.
- Morgan Stanley: The firm said it remains constructive over a 6-12 month horizon as earnings growth reaccelerates and market breadth improves. However, it warned that equities are vulnerable to additional near-term volatility if oil continues to rise alongside a stronger dollar. The bank recommended Quality and Healthcare as defensive hedges, and expressed preference for cyclical exposure in Financials, Industrials, Consumer Discretionary and Small Caps over the intermediate term. It flagged a bear-case risk of oil prices staying above $100 per barrel for a multi-month period and a Fed that does not cut rates or add liquidity.
- BTIG: The firm noted that a break below 6,700 on the S&P 500 would open the door to a test of the 200-day moving average near 6,582, which would be about 3% lower. BTIG said semiconductor weakness helped pressure markets and that confidence in the 6,700 level holding has diminished, although a sharp move toward the 200-day average should remain a buyable dip.
- Evercore: Evercore described a tension between downside fear, amplified by geopolitics, and optimism driven by resilient economic activity and modest rates. The firm reiterated a year-end S&P 500 target of 7,750 while noting that elevated hedging activity in equity options reflects heightened investor caution, which Evercore views as creating buying opportunities.
- Goldman Sachs: Goldman highlighted that the S&P 500’s price action this week is similar to past geopolitical shocks. The index fell about 2% during the week with large intra-week swings. The firm noted that across seven geopolitical episodes since 1950, the S&P 500 has averaged a 4% decline in the first week but typically recovered within the following month.
- RBC Capital Markets: RBC said the market is in a discovery phase regarding how the Iran conflict will unfold, including duration and potential impacts on oil prices and other derivative effects. For now, RBC assumes the market can return to its prior trajectory, but acknowledged that a prolonged conflict and higher oil would likely force revisions to its assumptions.
Bottom line
Markets enter the new week with geopolitics and inflation data at the forefront. The interplay between oil prices, the pace of economic data, and central bank expectations will be pivotal in shaping near-term market direction. With the CPI release on Wednesday and further potential developments in the Middle East, investors will be monitoring whether recent volatility resolves quickly or signals a longer period of elevated uncertainty.
Included companies reporting earnings this week: Hewlett Packard Enterprise, Oracle, Adobe.