Markets Turn Cautious as Hormuz Tensions Drive Oil Surge and Inflation Fears

Index Update:  U.S. stocks were mixed on Friday, with the S&P 500 and Nasdaq 100 rising up to 0.5% and extending their winning streak, supported by easing geopolitical concerns and optimism over U.S.-Iran talks. Signs of resumed tanker flows through the Strait of Hormuz helped calm inflation worries linked to energy prices, boosting risk sentiment and lifting tech stocks such as Amazon, Meta, and Nvidia. However, financial stocks edged lower ahead of upcoming earnings, keeping the Dow near flat.

Market Movers:  On Friday, the top gainers were Sky Quarry Inc. (+72.70%) and Zentalis Pharmaceuticals, Inc. (49.55%). On the contrary, One and One Green Technologies. INC. (-62.90%) and Luda Technology Group Limited. (-32.55%) declined the most the same day.

Commodities Update:  Oil prices surged sharply on Monday, with WTI rising over 9% to above $105 per barrel and Brent gaining around 8% to near $103, as markets reacted to the U.S. decision to impose a blockade on the Strait of Hormuz following failed negotiations with Iran. The restrictions, targeting vessels linked to Iranian ports, heightened supply disruption fears as the key shipping route has effectively remained shut amid ongoing conflict. Escalating geopolitical demands from both sides, including disputes over nuclear ambitions and regional control, further clouded the outlook, driving concerns around inflation and global growth. Meanwhile, Saudi Arabia’s move to restore full capacity via its East-West pipeline and Manifa field provided a partial offset to supply risks. Gold and silver prices declined on Monday, with gold falling toward $4,700 per ounce and silver slipping below $75, as escalating U.S.-Iran tensions and plans for a Strait of Hormuz blockade fueled a surge in energy prices and heightened inflation concerns. The collapse of diplomatic talks and continued disruption of the key shipping route have strengthened expectations that central banks may delay rate cuts or adopt tighter policies, pressuring precious metals despite geopolitical risks. As a result, gold has fallen over 10% and silver more than 20% since the conflict began.

Macro Updates

Dollar Strengthens as Geopolitical Risks and Inflation Concerns Intensify

The dollar index rose above 99 on Monday, rebounding from prior losses as escalating U.S.-Iran tensions and the announcement of a Strait of Hormuz blockade boosted safe-haven demand. The breakdown in negotiations and rising energy prices heightened inflation concerns, strengthening expectations that the Federal Reserve may delay rate cuts or consider tightening, thereby supporting the dollar’s gains.

Widening Fiscal Deficit Amid Rising Government Spending

The U.S. reported a budget deficit of $164.1 billion in March 2026, slightly wider than the $160.5 billion shortfall a year earlier and above expectations. Government spending increased to $549 billion, led by social security, healthcare, and defense outlays, while receipts rose to $384.9 billion, supported by higher individual income taxes, social insurance contributions, and customs duties.

Bonds Commentary:  The U.S. 10-year Treasury yield rose to around 4.35% on Monday, reversing prior declines as escalating U.S.-Iran tensions and the announcement of a Strait of Hormuz blockade heightened inflation concerns. The breakdown in diplomatic talks and continued disruption to a key energy shipping route drove oil prices higher, reinforcing expectations that the Federal Reserve may delay rate cuts or potentially tighten policy further.

Futures Update:  U.S. stock futures declined on Monday, with Dow, S&P 500, and Nasdaq 100 futures falling 0.5%–0.7%, as escalating tensions between the U.S. and Iran dampened sentiment. Concerns intensified after threats of a U.S. Navy blockade of the Strait of Hormuz and stalled diplomatic talks, raising doubts over the durability of a fragile ceasefire.

After a pullback to start Thursday's session, stocks mostly finished higher, but on Friday, they exhibited a relatively sluggish performance. Throughout the trading day, the major averages fluctuated before ending with mixed results. Despite the lackluster daily performance, all the major indices recorded strong weekly gains, largely driven by Wednesday's rally. The S&P 500 rose by 7.77 points, or 0.11%, to close at 6,816.90. Currently, the index is near a key resistance zone and may face a downward move in the near term. The failure of Iran-US talks could act as a catalyst to push prices lower. The rising key moving averages will serve as immediate support levels. Additionally, the 14-period RSI is approaching overbought territory and may decline toward the midpoint. Immediate resistance is seen around 6,875, with support located near 6,700.