Brent Oil Surge Pressures S&P 500 as Strait Risks Escalate

Brent oil’s sharp surge above $115 has intensified pressure on the S&P 500, with energy-driven inflation fears weighing on global equities. Asian markets fell broadly, while US futures reflected growing concern over prolonged Middle East disruptions, particularly around the Strait of Hormuz and Red Sea routes. Central bank outlooks shifted more hawkish, with fading expectations for Fed easing and rising bets on ECB tightening. Geopolitical escalation risks continue to dominate market direction.

Equities

The FTSE 100 closed slightly lower on Friday, slipping late in the session as uncertainty around the Middle East conflict continued to weigh on sentiment. The mid-cap FTSE 250 fell more sharply and remained on track for a notable monthly decline. Despite the weaker finish, the FTSE 100 held onto modest gains for the week.

AstraZeneca shares rose on Friday after the company reported positive late-stage trial results for an experimental respiratory treatment, lifting healthcare stocks. In contrast, Lloyds Banking Group fell after it emerged that an IT issue had exposed customer data, raising concerns about operational controls. Metlen dropped heavily after delaying its full-year results, placing it among the weakest performers on the index.

Retail data added to the cautious tone, with UK sales falling in February following a strong January, while consumer confidence weakened to its lowest level in nearly a year. The Bank of England has indicated it is too early to assess the full economic impact of the conflict, though rising energy prices are already beginning to filter through to households.

In the United States, the S&P 500, Dow Jones Industrial Average and Nasdaq Composite all closed lower on Friday, each marking their lowest levels in more than seven months. The Dow confirmed it had entered correction territory, having fallen more than 10% from its February peak, while all three indices recorded a fifth consecutive weekly decline.

Amazon dropped sharply, weighing on consumer discretionary stocks, while Nvidia also fell and was a significant drag on the broader market. Cruise operators were under pressure, with Carnival Corporation declining after cutting its annual profit outlook, and Norwegian Cruise Line Holdings falling further.

Rising oil prices added to inflation concerns, prompting markets to scale back expectations for interest rate cuts from the Federal Reserve. Policymakers, including Anna Paulson, have acknowledged the economic risks stemming from the conflict, while consumer sentiment data pointed to growing caution among households.

Forex & Commodities

The US dollar steadied early on Monday, holding near 100.1 on the dollar index after a strong run through March, as markets continued to price in a prolonged Middle East conflict. The euro edged higher to around 1.151, while sterling traded near 1.327, both still on course for monthly declines against the dollar. The yen weakened beyond 160 earlier in the session before recovering to roughly 159.7, as Japanese officials signalled readiness to intervene and the Bank of Japan indicated it may respond to currency-driven inflation pressures.

Oil markets remained the central focus, with Brent crude climbing above 116.5 early Monday, extending a sharp rally driven by escalating tensions around the Strait of Hormuz and renewed attacks linked to Yemen’s Houthis. Supply concerns intensified as the conflict spread into the Red Sea, raising risks to critical shipping routes and Saudi export flows. The scale of the move has prompted traders to reassess inflation expectations and the likely policy response from central banks.

Gold prices rose modestly to about 4,529 per ounce in early trading, supported by a softer dollar, though gains were limited by the shift in interest rate expectations. Bullion has been under pressure through March as markets moved away from anticipating rate cuts this year.

In central bank developments, expectations for the Federal Reserve have shifted markedly, with markets now pricing in the possibility of a rate increase rather than earlier expectations of easing. Policymakers are balancing rising energy-driven inflation against weakening growth signals, reinforcing concerns about stagflation as attention turns to remarks from Chair Jerome Powell later today.