Wall Street closed lower on Friday, though the declines were more moderate than those seen in European markets, as investors continued to grapple with escalating tensions in the Middle East and their potential impact on global energy supplies and economic growth. The Nasdaq Composite led the retreat, falling 0.7%, while the S&P 500 shed 0.6%. Concerns over geopolitical risk are weighing heavily on investor sentiment, particularly as the conflict between Iran and the United States intensifies.
The energy sector is at the forefront of market anxieties, with crude oil prices surging above $100 a barrel. West Texas Intermediate (WTI) crude oil is trading at levels not seen in months, fueled by fears of supply disruptions. Natural gas prices in Europe also jumped, rising 13% to 61.7 euros per MWh. These price increases are directly linked to the recent attacks on critical energy infrastructure, specifically the damage sustained at Qatar’s Ras Laffan gas hub following what was described as an Iranian bombing. Reuters reports that approximately 17% of Qatar’s production capacity will be offline for at least three years.
Geopolitical Risks and Energy Markets
The situation in Qatar is particularly concerning, as Prime Minister Mohammed bin Abdulrahman Al Thani condemned the attack, stating it has “significant repercussions on global energy supplies.” The disruption to Qatar’s production capacity adds to existing anxieties about energy security, especially as winter approaches in the Northern Hemisphere. The potential for further escalation in the Middle East is driving volatility across commodity markets.
In an effort to mitigate the impact of rising oil prices, the United States is considering a rollback of sanctions on Iranian oil, according to Treasury Secretary Scott Bessent. Speaking on Fox Business, Bessent indicated that the administration could also release strategic petroleum reserves. He stated that the U.S. Is already allowing Iranian oil to transit the Strait of Hormuz and currently holds approximately 140 million barrels of Iranian oil at sea, representing a supply equivalent to 10 to 14 days of global demand. Bessent added that, should sanctions be eased, Iranian oil could be redirected to countries like Malaysia, Singapore, Indonesia, Japan, and India, nations he identified as having maintained positive relations throughout the crisis.
Economic Data Offers Mixed Signals
Despite the geopolitical headwinds, some positive economic data provided a degree of support for markets. Initial jobless claims rose by 205,000, slightly less than the previous week’s revised figure of 213,000 and better than expectations of 215,000. This suggests continued strength in the labor market. The Philadelphia Fed’s manufacturing index also climbed to 18.1 in March, up from 16.3 the previous month and exceeding forecasts of 8 points, indicating an expansion in manufacturing activity in the region. February building permits increased to 1.386 million, surpassing both the prior month’s 1.376 million and analysts’ predictions of 1.380 million.
European Markets Under Pressure
European stock markets experienced more significant declines than their U.S. Counterparts. The Euro Stoxx 50 index fell 2%, while the Dax in Frankfurt dropped 2.7%. In Italy, the FTSE Mib in Milan closed down 2.3%. Eni and Saipem were among the few gainers, rising 3% and 1% respectively. Inwit experienced a sharp decline of 12% following an agreement regarding telecom towers, while Prysmian, Ferrari, and Bper Banca all saw losses of 5%, 4%, and 4% respectively. Unicredit fell 3.5%.
ECB Maintains Rates, Warns of Inflation Risks
The European Central Bank (ECB) held interest rates steady at 2% but cautioned that the war in the Middle East poses upward risks to inflation and downward risks to economic growth. According to a statement released by the central bank, “the next move of the ECB will probably be a rate hike; however, a tightening in the short term appears unlikely unless such pressures prove persistent.” Simon Dangoor, deputy chief investment officer of Fixed Income and head of Fixed Income Macro strategies at Goldman Sachs Asset Management, commented that the Council is “clearly sensitive to the risks to inflation but will likely seek to assess the potential side effects before acting.” He suggested a potential rate increase later in 2026, but emphasized the ECB’s readiness to act sooner if the situation deteriorates.
Other Market Movements
Gold prices fell 4.5% to $4,517 per ounce, while the dollar weakened against the euro, with the exchange rate reaching 1.153, a 0.7% increase. The yield on the 10-year Treasury note rose by 1 basis point to 4.26%, and the BTP (Italian government bond) yield stood at 3.75%. Bitcoin experienced a 2% decline, trading above $69,500.
Stocks in Focus
Alibaba shares listed in the U.S. Fell 5% after the company reported fourth-quarter results that fell short of expectations. Revenue came in at 284.8 billion yuan, below the LSEG estimate of 290.7 billion yuan, while net profit plummeted 66% year-over-year to 15.6 billion yuan. Align Technology saw a 7% increase after Elliott Investment Management acquired a significant stake, with the activist investor reportedly seeking ways to boost the stock price, according to Bloomberg. Eli Lilly announced positive results from a Phase 3 clinical trial of its new obesity drug, Retatrutide, demonstrating its effectiveness in managing blood sugar levels and promoting weight loss in patients with type 2 diabetes. Five Below surged 5% after reporting adjusted earnings per share of $4.31 on revenue of $1.73 billion, exceeding analyst expectations. The company forecasts first-quarter adjusted earnings between $1.57 and $1.69 per share. Micron dropped 5% despite strong quarterly results driven by demand for memory chips used in Nvidia’s AI applications. Investors are focused on the substantial investment required to increase production capacity. Newmont Corporation fell 8% in line with declining gold prices. Finally, fertilizer stocks rose following a Reuters report that China is limiting fertilizer exports, with CF Industries, Mosaic, and Intrepid Potash gaining 3%, 1%, and 2% respectively.
The ongoing conflict in the Middle East continues to cast a long shadow over global markets, creating uncertainty and volatility. Investors will be closely watching developments in the region and assessing the potential for further disruptions to energy supplies and economic activity. The next key event to watch will be any further announcements from the U.S. Treasury regarding potential sanctions relief for Iranian oil, as well as any updates from the ECB on its monetary policy outlook.
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