The domestic market closed lower for the third consecutive week as rising oil prices and geopolitical tensions dominated the market narrative.

The losses across the major markets were fairly similar. Emerging Markets and the Dow dropped by 2%, the S&P 500 fell by 1.6% and the Nasdaq came out as the best of the worst with a loss of 1.26%.

The biggest driver last week was the surge in crude oil tied to the escalating conflict involving Iran and disruptions around the Strait of Hormuz. Oil swung throughout the week and finished sharply higher, pushing closer to $100 per barrel, increasing concerns about inflation.

As energy prices climbed, investors reduced expectations for Federal Reserve rate cuts. As the CME Group shows with their FedWatch tool, rate cut expectations have shifted to odds of the next 25 basis point cut to be between 50/50 and around 75% mid to late 2026. This tied into Treasury yields which moved higher as markets priced in the possibility that the Fed may stay restrictive longer if inflation pressures return.

Sector performance reflected those dynamics. Energy was the top performer, while defensive areas like utilities and consumer staples held up relatively well. Meanwhile, financials, industrials, and consumer discretionary stocks lagged, pressured by rising yields and higher fuel costs. Technology was mixed, with semiconductor stocks showing resilience while software names faced continued selling pressure.

Economic data largely matched expectations, including February CPI and January PCE inflation readings, but markets looked past those reports given the recent spike in energy prices.

Overall, the key theme right now is simple: markets are trading on energy prices and geopolitical headlines. As long as oil remains volatile amid the conflict in the Middle East, investors will remain highly sensitive to any news that could shift the outlook for inflation, interest rates, and global growth.