Persistent Iran war, energy price surge set to sway wavering stocks.

A Middle East crisis that has convulsed markets should remain the focal ⁠point ⁠for Wall Street in the near term, as investors stay glued ⁠to developments in Iran and the fallout from surging energy prices.

As the U.S.-Israeli war on Iran stretches to three weeks, an over 40% jump ​in oil prices is driving worries about higher inflation and stagnating economic growth.

Inflationary concerns on Friday were prompting markets to rule out any equity-friendly interest rate cuts this year, which investors previously had been counting on, with futures trading ‌instead suggesting modest chances of hikes in 2026. Federal ‌Reserve Chair Jerome Powell expressed deep uncertainty at the U.S. central bank’s meeting on Wednesday about how the crisis would factor into the economy, muddying its ability to forecast conditions ahead.

U.S. stocks suffered sharp declines to end the ⁠week. The benchmark S&P ⁠500 stock index posted its fourth straight weekly decline and hit a six-month low, while the Nasdaq Composite ended down ​nearly 10% below its October all-time high.

Middle East tensions escalated this week. Iran attacked energy facilities across the region following Israel’s strike on its gas field, while officials told Reuters on Friday that the U.S. military is deploying thousands of Marines to the Middle East.

“This is a situation that’s so fluid,” said Chris Fasciano, chief market strategist at Commonwealth Financial Network. “We could have a resolution in the next week or it could go on for some time. And the longer it ​goes on, you start to think about the impacts it could have on the U.S. economy.”

Swings in crude prices have rippled through asset classes. U.S. crude settled around $98 ⁠a ⁠barrel on Friday, while Brent ended around $112. In ⁠addition to the attacks on energy infrastructure, ​traffic has stalled in the Strait of Hormuz, through which around a fifth of the world’s crude oil and liquefied natural gas normally passes.

The 20-day correlation between the S&P 500 ​and U.S. crude stood at -0.89 late on Friday, according to ⁠LSEG data, a strong inverse relationship that showed they have tended to move in opposite directions.

“If you’re a trader, you watch oil prices because I do think that that’s generally giving the leading indicator as to how the financial markets are viewing the outlook for the conflict,” said Eric Kuby, chief investment officer at North Star Investment Management Corp.

The S&P 500 energy sector, which includes shares of oil companies, has gained since crude prices began to spike in late February, but the group accounts for less than a 4% weight in the benchmark index.

The latest declines left the S&P 500 down 6.8% from its record closing high set in late January. The pullback ⁠has mostly lacked the chaotic quality of the abrupt equity slide last April following President Donald Trump’s “Liberation Day” tariff announcement that set off broad economic ⁠worries, Fasciano said.

“This has been fairly orderly, which I think is an encouraging sign,” Fasciano said. “And I think it’s because the underlying fundamentals for corporate America are still fairly robust and are offering some support.”

Fast-climbing Treasury yields, driven higher by the energy price spike and caution from global central banks, were looming as a risk factor for stocks. The benchmark 10-year Treasury yield was last at 4.38% on Friday, its highest level since last summer.