Middle East and labor data shake financial markets

U.S. financial markets are going through a day characterized by volatility and rising investor concern, amid geopolitical tensions, a sharp surge in oil prices, and signs of deterioration in the labor market. In the latest episode of the podcast Mercado Sobre Ruedas, financial markets journalist Julián Yosovitch offers a look at the current state of the United States economy.

On the last trading day of the week, the Dow Jones index recorded a drop of more than 1.5%, while the S&P 500 fell by over 1%. With these results, the Dow accumulated a weekly loss of 3.4%, its worst performance since April 2025, while the S&P posted its biggest weekly decline since November, Yosovitch explains.

Uncertainty was also reflected in the VIX, known as the “fear index,” which rose above 27 points, its highest level since April 2025, signaling increasing risk aversion among investors.

Middle East war pushes oil prices higher

According to Yosovitch, one of the main drivers of volatility is the escalation of the conflict in the Middle East, which has now lasted seven days and is beginning to affect key sectors such as energy, transportation, and global supply chains.

Crude oil prices surged sharply:

• WTI rose 8.5% to $81 per barrel.
• Brent climbed more than 5%, surpassing $85.

On a weekly basis, WTI has gained nearly 29% and Brent more than 20%, the largest increases since the pandemic. Both are at their highest levels since 2024.

In addition, Yosovitch points out that the market’s main concern centers on the Strait of Hormuz, through which about 20% of the world’s seaborne oil trade passes. A prolonged blockade could trigger a global energy crisis.

Impact on inflation and monetary policy

Rising oil prices are also causing concern because of their inflationary impact. As a key input for many industries and for transportation, increases in oil prices often pass through to final consumer prices and put upward pressure on inflation, the Mercado Sobre Ruedas expert explains.

This scenario complicates the outlook for the Federal Reserve (Fed), which must balance its dual mandate: price stability and full employment. A rise in inflation could limit the central bank’s ability to cut interest rates.

Adding to the energy tensions, a weak labor report was released. In February, the U.S. economy lost 92,000 jobs, while analysts had expected the creation of around 55,000 positions.

Additionally, the unemployment rate rose to 4.4% from 4.3%, and the labor force participation rate fell from 62.1% to 60%. Following the data release, the market raised the probability to 80% that the Fed will cut rates at least twice in 2026, possibly in July and December.

Amid the volatility, sectors reacted unevenly:

• Retail sector: declines of nearly 3%.
• Financial sector: drops of around 2%.
• Technology, consumer, and entertainment: also lower.
• Oil and gas: moderate gains benefiting from the rise in crude prices.

A scenario of high uncertainty

Analysts agree that market performance will mainly depend on two factors: the duration of the conflict in the Middle East and the evolution of inflation and employment in the United States.

Meanwhile, Yosovitch concludes that investors are preparing for weeks of high volatility, with attention focused on the next Federal Reserve meeting scheduled for March 18, where the market estimates a 94% probability that interest rates will remain unchanged.