The stock market endured another volatile week as a surge in oil prices tied to the escalating conflict with Iran dominated the headlines. The market finished lower across the board, with the S&P 500 declining 1.6%, the Nasdaq Composite falling 1.3%, and the Dow Jones losing 2.0%. Small-cap stocks finished similarly, with the Russell 2000 declining 1.8% and the S&P Mid Cap 400 falling 2.0%.
The defining theme of the week was the market’s sensitivity to energy prices. Crude oil swung sharply throughout the week on headlines surrounding the conflict and disruptions in the Strait of Hormuz, ultimately finishing 5.5% higher. Each move higher in crude pressured equities as investors reassessed the inflation outlook. By the end of the week, investors were no longer confident the Fed would deliver even a single 25-basis point rate cut in 2025.
Sector performance largely mirrored the impact of higher oil prices. The energy sector was the only cyclical group to finish in positive territory, rising 2.1% for the week. Defensive areas also held up relatively well, with utilities gaining 0.4% and consumer staples slipping just 0.2%. Most other sectors struggled. Financials fell 3.4% amid rising yields and renewed pressure in private credit markets, while industrials declined 3.2% as transportation stocks were hit by rising fuel costs. Consumer discretionary dropped 3.0%, weighed down by weakness in travel-related names and homebuilders as higher yields pushed mortgage rates higher.
Technology held up somewhat better than the broader market but still finished lower. The technology sector slipped 0.8% and communication services declined 1.2%. Under the surface, performance diverged. Semiconductor stocks showed resilience, with the PHLX Semiconductor Index rising 1.8% for the week, while software names faced persistent selling pressure, sending the iShares Expanded Tech-Software ETF down 4.3%.