The Top Line
Markets staged a dramatic comeback Monday after President Trump suggested the conflict with Iran is nearly over — sending stocks higher and oil crashing back from over $100 a barrel. The mood has shifted from panic to cautious relief, but uncertainty about energy prices and inflation means the volatility is far from finished.
We are operating in a transitional/mixed regime defined by a stagflationary collision: a labor market that printed -92,000 nonfarm payrolls in February — the worst reading in four months — against a geopolitical energy shock that has sent WTI crude from $65 to above $100 in ten days. January CPI came in at a seemingly benign +2.4% YoY, but that figure predates the Iran-driven oil surge that pushed national average gasoline prices to $3.47 per gallon by Monday morning and caused the New York Fed's February consumer inflation expectations survey to spike to 4.2% — the largest single-month jump since the post-pandemic supply chain crisis. The Atlanta Fed's GDPNow is signaling deterioration in Q1 growth estimates while the inflation outlook is worsening in real time, a combination that historically precedes the most difficult policy environments for the Federal Reserve. The structural question confronting the market this week is whether the oil shock proves transitory — as BlackRock's strategists argued Monday, framing it as "short-lived" — or whether the Strait of Hormuz closure and Gulf production cuts represent a durable supply disruption that forces the Fed to abandon its tentative cutting cycle entirely.
Inflation
Oil prices are the inflation story right now. When oil spikes, it eventually pushes up the cost of nearly everything — gas at the pump, shipping, manufacturing, food. Last week, oil surged over 35%, the biggest weekly jump on record, driven by the U.S.-Iran conflict closing a critical Middle Eastern shipping lane called the Strait of Hormuz. On Monday, prices briefly crossed $100 a barrel before pulling back sharply to around $86 after Trump signaled the war may be winding down. The Fed — the group that sets interest rates to keep prices stable — now faces a tricky situation: the economy was already slowing (last Friday's jobs report showed 92,000 jobs were actually lost in February), but an oil-driven price surge could reignite inflation and tie the Fed's hands on rate cuts. Markets now expect just one small rate cut this year, pushed out to September at the earliest.
Key Takeaway
Oil is the wildcard — if it stays elevated, expect fewer rate cuts and higher borrowing costs for longer.
The last official CPI print — January 2026 — showed headline inflation at +0.2% MoM and +2.4% YoY, a reading that markets initially celebrated as evidence the disinflation trend from 2025 was still intact. Core CPI in January advanced a softer-than-expected +0.19% MoM, with shelter rising modestly at +0.2% while energy provided a -1.5% tailwind. That data now reads like a relic from a different economic era. In the ten days since the U.S.-Iran conflict began, WTI crude spiked from the mid-$60s to an intraday high above $120 before partially reversing; as of Monday's close, WTI was trading around $97 per barrel — still up approximately 50% from pre-conflict levels. The energy component of CPI carries a 6% index weight, but gasoline's impact on consumer sentiment and services costs is structurally much broader. RBC Economics projects that if WTI sustains anywhere near $100, headline inflation will breach 3% by Q2, erasing much of the disinflation progress achieved throughout 2025.
The February CPI report — due tomorrow morning at 6:30 AM MT — will be closely watched but carries a critical analytical caveat: most of the Iran conflict's price impact occurred in the final days of February, meaning tomorrow's data will only partially capture the shock. Consensus estimates for February CPI center around +0.21% MoM and approximately +2.4% YoY on the headline, with core expected at roughly +0.19% MoM — largely consistent with January's trajectory. The more alarming leading indicators come from the producer price channel: core PPI jumped +0.8% MoM in January following +0.6% in December, with wholesale margins driving most of the gains — a pattern consistent with tariff-related cost transmission approaching the consumer level. The CPI/PCE divergence also deserves monitoring; core PCE is running approximately 0.4 percentage points above core CPI, largely due to financial services weighting, suggesting measured PCE inflation is closer to 3.0% even before the oil shock propagates.
The most consequential inflation data point released Monday was not the CPI itself but the New York Fed's February Survey of Consumer Expectations, which showed one-year inflation expectations surging to 4.2% from 3.1% in January — the largest single-month increase since the supply chain crisis of 2021-22. Three-year expectations also rose to 3.5%, a de-anchoring signal that historically triggers a materially more defensive Fed posture. Fed funds futures markets have already re-priced dramatically: traders now expect only one 25-basis-point cut in 2026, most likely in September, compared to expectations for two cuts just a week ago. The March 18 FOMC meeting — now just eight days away — is priced at 97%+ probability of a hold, but the composition of the post-meeting statement and updated dot plot will be the most significant Fed communication event of the quarter.
Key Takeaway
The Fed is firmly on hold, pivoting from data-dependent to crisis-monitoring mode. Financial conditions have tightened sharply on the oil shock, with the DXY at its highest since November 2025 and real rates rising as inflation expectations surge ahead of actual prints. The first realistic cut window is September at the earliest — and only if oil reverses materially and the labor market deteriorates further.
Risk and Positioning
Monday was a rollercoaster. The market's fear gauge — the VIX — hit its highest level since November, meaning investors are genuinely anxious right now. At its worst, the Dow was down nearly 900 points. Then Trump's "war is pretty much complete" comment flipped the mood entirely, and stocks closed up. The VIX fell about 14% on the day but remained well above 25, which historically signals an unstable, choppy market — expect sharp swings in both directions this week. Safe-haven assets like the U.S. dollar and government bonds attracted buyers throughout the session, reflecting how unsettled investors remain beneath the surface rally.
Key Takeaway
The recovery is real but fragile — one negative Iran headline could send stocks sharply lower again.
Monday's market action was defined by a dramatic intraday reversal — not a resolution of underlying risk. The S&P 500 fell as much as 1.5% in early trading, with the Dow off nearly 900 points as WTI briefly surpassed $100 per barrel for the first time since 2022 and the VIX spiked above 30 before partially retreating. The catalyst for the reversal was a CBS News report citing President Trump's comment that the war against Iran was "very complete, pretty much" — a statement interpreted as signaling potential conflict resolution. The index clawed back to a +0.83% close at 6,795.99, but critically, the VIX closed at 23.57 — still elevated relative to its pre-conflict range — after having printed a intraday high above 35. The prior close was 29.49, making Monday's -20.07% VIX decline a reflection of hope rather than a structural improvement in the risk landscape. The S&P 500 remains below both its 50-day moving average (broken February 27th) and the 100-day moving average at approximately 6,838, and is down approximately 3.4% from its January 27th all-time high.
Risk sentiment is best characterized as Mixed with a defensive undertone, despite the equity rally. The equity rebound was narrow and geopolitically-driven rather than broad-based or earnings-supported. Credit markets remain under stress, with high yield spreads elevated and investment grade spreads wider than they were a month ago as rate uncertainty compounds credit risk. The dollar index (DXY) closing at 99.68 — its highest level since November 2025 — signals continued safe-haven rotation into USD, driven by both inflationary hedging and relative U.S. energy independence compared to European and Asian peers. This dollar strength is itself a headwind for multinational earnings and emerging markets. Gold's behavior is worth monitoring: it has faced some selling pressure despite the geopolitical backdrop, a reflection of the competing upward pressure from rising real yields rather than a signal of genuine risk appetite recovery.
The most important internal market contradiction to resolve is the divergence between the equity rebound and the bond and volatility markets. Treasuries rallied (yields fell) on Friday's weak jobs report but rose 4 basis points Monday to 4.15% — a market pricing inflation risk over growth risk. With VIX still at 23.57 and the 10Y yield at its highest in approximately a month, the equity market is essentially pricing in a "Trump de-escalation put," while fixed income is pricing a structurally tighter inflation regime. One of these views will prove incorrect within days. The upcoming February CPI tomorrow morning is the first test of whether the bond market's inflation concern is validated by data or premature — but either outcome, the real stagflation reckoning will come in March and April CPI as the oil shock fully appears in the official data.
Key Takeaway
Implied volatility collapsed intraday but remains elevated at 23.57 VIX — the market is not back to complacency. Realized 5-day volatility has been extraordinary, with 1.5%+ daily intraday swings becoming the norm. Tail risks are the highest since the April 2025 tariff episode: a failed Iran de-escalation or a CPI surprise tomorrow could quickly drive the VIX back above 30 and test the 200-day moving average near 6,582.
Sector and Cross-Asset Analysis
Monday's winners and losers told the whole story. Oil and gas companies surged as crude oil prices spiked — energy was the clear standout early in the day. Biotech stocks also jumped after news that a key FDA official is stepping down, with several names gaining 7–18%. Tech companies led the broader afternoon recovery, with the Nasdaq closing up over 1.3% — investors rotated back into growth stocks as fear eased. Cruise line stocks fell sharply, since rising oil prices eat directly into their profits. Banks and rate-sensitive businesses stayed under pressure, given the uncertainty over when — or whether — the Fed will cut rates.
Key Takeaway
Energy and tech led; travel and rate-sensitive stocks lagged — the market is rewarding what benefits from the oil shock and punishing what doesn't.
The sector landscape of the past week reflects a classic geopolitical oil shock rotation, albeit with some distinctive 2026-specific features. Energy (XLE) has been the dominant outperformer, up over 25% year-to-date and continuing to lead on Monday as Exxon, Chevron, ConocoPhillips, and Marathon Petroleum all posted gains even on a volatile session. This is the mirror image of what crushed Materials (XLB, -7% for the week of March 2-6) and Industrials, which are deeply exposed to energy input costs and slowing global growth. Financials also suffered disproportionately last week — Goldman Sachs fell 3.7% Thursday alone — as curve dynamics and credit concerns weighed. The week's most surprising rotational signal was technology's relative resilience: the Nasdaq dropped a more modest 1.24% for the week of March 2-6, and software (IGV) posted its best week since April 2025 (+6%), reflecting a flight to quality toward cash-rich, domestically-oriented mega-cap companies with minimal commodity exposure.
Biotechnology provided a specific Monday catalyst, with uniQure (+18%), Dyne Therapeutics (+13%), and Denali Therapeutics (+7%) surging on news that FDA official Vinay Prasad will depart at the end of April. Cruise lines were notable laggards, down sharply as fuel cost concerns directly threaten operating margins at companies like Royal Caribbean, which already fell more than 10% last week. The small-cap Russell 2000 is the most strategically significant casualty of this environment, having given up its year-to-date gains: it fell 2.39% on Friday and is now barely green on the year. Small caps are the most sensitive to domestic growth deceleration (they can't globally diversify), energy cost pass-through difficulty, and tighter credit conditions — all three headwinds are now present simultaneously.
Cross-asset correlations have shifted back to the 2022 regime — stocks and bonds fell together last week on inflation fears before partially diverging Monday when the peace signal triggered equity relief but bonds still tracked oil and inflation. The dollar's strength against the euro and Swiss franc (its biggest recent gains, per Trading Economics) illustrates the unusual nature of this shock: the U.S. is experiencing a terms-of-trade benefit relative to energy-importing nations, which is supporting dollar strength even as the domestic economy weakens. WTI crude's intraday trip to $120 before reversing toward $97 is itself the defining cross-asset story — that reversal is what drove equity recovery and VIX compression, but oil remains more than $30 above pre-conflict levels and the Strait of Hormuz situation is unresolved.
Key Takeaway
Energy is the only sector with unambiguous momentum. Technology is the relative safe haven within equities. Everything leveraged to global growth — industrials, materials, small caps, cruise lines, financials — remains under structural pressure until there is verifiable de-escalation in the Strait of Hormuz. Market leadership is geopolitically-driven, not fundamentally-driven, making it inherently unstable and reversal-prone.
Economic Data & Events
Today's calendar is light on market-moving U.S. data, but one report already landed this morning:
- 6:00 AM MT — NFIB Small Business Optimism — Moderate Impact
- A monthly survey of small business owners about their confidence in the economy. February reading came in at 98.8, slightly below the expected 99.6 and down from January's 99.3. Small business owners are feeling a bit less optimistic, though the index remains near its long-term average.
The bigger reports are coming later this week. Wednesday brings the CPI inflation report (think: a monthly read on how fast prices are rising, from groceries to rent), which will be the most important data of the week. With oil still rattling markets and a surprisingly weak jobs report last Friday, investors are on edge about whether inflation is cooling or about to heat back up.
Key Takeaway
Wednesday's inflation report is the one to watch — it will set the tone for how the Fed thinks about interest rates for the rest of spring.
Today's Calendar
- No major U.S. economic data releases scheduled for Tuesday, March 10th.
- Today is a light domestic calendar session. The most significant event is an overnight data release.
- Overnight — Japan Q4 2025 GDP (Final) — Low–Moderate Impact
- Consensus: ~+0.6% QoQ annualized | Previous: Preliminary +2.8% QoQ annualized.
Watch for any revisions signaling demand resilience or deterioration ahead of the global growth slowdown.
- 6:40 PM MT — API Weekly Crude Oil Inventory Report — Moderate Impact
- Consensus: Build of ~+1.0M barrels expected | Previous: Build of +13.4M barrels (per industry report; a massive build suggesting demand destruction).
Given WTI's extreme volatility this week, any inventory surprise will move energy markets after hours.
Week Ahead
Wednesday's February CPI print (6:30 AM MT, March 11) is the single most important data release of the week — and arguably of the month. With one-year inflation expectations already surging to 4.2%, a surprise to the upside would accelerate Fed re-pricing and pressure equities materially. Friday brings January PCE and the FOMC enters its blackout period ahead of the March 18 policy decision, where a hold is essentially certain. The week's geopolitical headlines may matter as much as the data.
What We're Watching
Monetary Policy
The Fed holds March 18 with near-certainty — the debate is now about September. Any CPI print above +0.35% MoM tomorrow resets the entire 2026 cutting timeline. Watch the dot plot for the first explicit signal that the oil shock has changed the terminal rate path.
Rates & Fixed Income
The 10Y is trapped between 4.10% and 4.22%, pulled by growth fears and inflation fears simultaneously. A break above 4.25% — driven by CPI or sustained oil above $100 — would be structurally bearish for equities. Underweight long duration; favor 2–5 year quality credit.
Equities
The SPX is in a geopolitically-hostage regime: headline-driven rallies on peace signals, selloffs on escalation. The 6,582 200-day moving average is the line in the sand. Favor mega-cap tech quality and energy; reduce industrial and financial exposure until growth/inflation mix clarifies.
Key Risks
Four risks dominate: (1) Iran re-escalation sending WTI back above $110; (2) a hot February CPI tomorrow forcing Fed hawkishness; (3) growth deteriorating faster than energy costs recede — the stagflation trap; and (4) a dollar-driven EM credit event if DXY sustains above 100.
The Bottom Line
Monday's comeback was encouraging, but this market is still on edge — the Iran situation, oil prices, and a softening job market are all unresolved. Stay tuned to Wednesday's inflation report; it is the most important number of the week and could move your portfolio meaningfully in either direction.
The 10-year yield at 4.15% is navigating a crosscurrent between safe-haven demand from labor market weakness and inflationary pressure from oil, keeping it range-bound in the 4.10%–4.22% corridor with near-term resistance at 4.22%. Equity breadth remains poor — the S&P 500 has been below its 50-day moving average since February 27th, and Monday's recovery was geopolitical-headline-driven rather than broad-based, leaving the 200-day moving average at approximately 6,582 as the critical structural support to monitor. Today's session is likely to be headline-driven and volatile, trading in a range between 6,720 support and 6,850 resistance on SPX, with the dominant intraday risk being any update on Iran conflict status, WTI price action, or an early leak of Wednesday's CPI positioning. Energy and defensive technology remain the tactical overweights; industrials, materials, and small caps remain the underweights until we have verifiable conflict resolution.
Disclosure — AI-Assisted Content & Regulatory Notice
This briefing was drafted with the assistance of artificial intelligence tools. All content has been reviewed and approved by Thomas MacPherson, Investment Adviser Representative (Series 65) and Chief Compliance Officer, River Rose Financial, LLC, prior to publication. AI systems may produce errors, omissions, or outdated information; readers should independently verify data.
Market Currents does not constitute an investment advisory relationship, does not create a fiduciary duty, and does not include personalized investment advice. Subscribers should not rely on Market Currents as a substitute for individualized financial advice. This briefing is for informational purposes only. Market conditions change rapidly; all data and projections are subject to revision without notice.
River Rose Financial, LLC is a registered investment adviser with the State of Colorado. Registration does not imply a certain level of skill or training. Past performance is not indicative of future results. All investment strategies involve risk, including possible loss of principal.
