What’s News in Markets: Oil Prices Surge, Bond Selloff, and Iran Fallout

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Hannah Erin Lang (0:33)

Hey, listeners. It's Saturday, March 7th. I'm Hannah Erin Lang for the Wall Street Journal. And this is What's News in Markets, our look at the biggest moves of the week and the news that drove them. So let's get into it. This was a really rough week for markets. Stocks declined this week, and they are now very solidly in the red this year. Investors have a lot of negative headlines to contend with. Of course, the biggest story is war in the Middle East. A widening conflict that began when the United States attacked Iran this past Saturday is threatening to send shockwaves across the global economy. That would be a lot for Wall Street to digest on its own. But let's not forget that markets didn't exactly start this past week on the strongest footing. We still have these lingering concerns about artificial intelligence. Investors spent a lot of last month worrying that AI could erase jobs or upend entire industries in ways we might not be prepared for. And to top it all off, Friday's job support was a lot worse than expected. The US economy lost 92,000 jobs. One big fear among investors is that we could see stagflation take shape. That's when economic growth stalls but prices still rise, which could also put the Federal Reserve in a tight spot when it comes to deciding whether to cut or hold interest rates. Not great. The Dow is down 3% this week. It's worst week since the tariff turmoil that racked markets last April. The S&P 500 fell 2% and the Nasdaq fell 1.2%.

One of the most important tickers to watch this week was the price of oil. The war with Iran has forced a de facto closure of the Strait of Hormuz, a key shipping route for global energy. Benchmark US crude futures surged roughly 36% this week to $90.90 a barrel. That was the largest one-week percent gain on record. Costs of diesel, gasoline, and jet fuel have surged at paces that echo 2022 after Russia's invasion of Ukraine. This is really bad news for investors. Rising oil prices push up consumer costs but can also cut into corporate profits, essentially threatening economic growth across the globe. The consensus on this has evolved over the past week. On Monday, the stock market reaction to the initial news of the US attack was relatively muted. Investors were betting the war would be brief and contained. But as that outlook has shifted, so has their optimism that markets and the economy will emerge unscathed.

Well, one of the most exciting parts about being a market supporter is that the markets are always changing. A trend can change week to week or even day to day. A few weeks ago, I wrote a story about the surprising outperformance of international equities this year, and how after years of being focused squarely on the US, American investors were starting to look abroad because those stocks were doing better. Yeah, not the case this past week. Global equity indexes got pummeled, especially in Europe and Asia. South Korea's KOSPI, which has been rocketing higher in 2026, tumbled roughly 11% this week. Germany's DAX slid 6.7%, and pretty much every international stock benchmark end of the week in the red. The reason for this, once again, has to do with oil. The United States, which receives relatively few oil shipments from the Middle East, is insulated from a global energy fallout in ways that other countries aren't. This is one reason why US energy stocks were some of the only stocks that rose in recent trading days. Shares of American companies like Occidental Petroleum and Marathon Petroleum were among the S&P 500's top performing on Friday, each rising roughly 1.8%. And finally, I want to talk about bond yields. The war in the Middle East has halted a weeks-long rally in US government bonds, pushing the yield on 10-year treasuries back above 4% this past week. Bond yields rise when prices fall, so this essentially means bond investors are selling. That's not typical. Stocks and bonds are supposed to work in opposite directions, but the conflict in Iran has changed that. Once again, it all comes back to oil. Bond investors are worried about rising energy costs and higher inflation that could erode the value of the asset. And even Friday's disappointing job support, something that would typically make ultra-safe treasuries look more attractive, wasn't enough to make traders change their tune. Yields still ended the week above 4.1%, logging their largest one-week gain since April. That's just bond traders, like so many other investors, are still focused on the energy markets. And now you know What's News in Markets this week. You can read about more stocks that moved on the week's news in our live markets coverage on wsj.com. Today's show was produced by Alexis Moore, with supervising producer Jana Herron. I'm Hannah Erin Lang. Have a great weekend and see you next Saturday.