The US stock market rose on Friday, putting Wall Street on track for a solid weekly gain. The S&P 500 is expected to post its best week since May with a 4% jump, driven by investor relief over a two-week temporary ceasefire between the US and Iran.
While equity markets have recovered, geopolitical tensions remain fragile. President Donald Trump has issued a stern warning to Tehran not to impose transit fees on oil tankers in the Strait of Hormuz. Uncertainty over the reopening of the strategic waterway has kept WTI and Brent crude prices high, hovering above $97 and $95 a barrel, respectively.
Regional tensions have also been heightened by Israel’s military action in Lebanon. Tehran has described the attack as a violation of the ceasefire terms, while international leaders such as British Prime Minister Keir Starmer have criticized Israel’s actions and expressed concern about the destabilizing global energy costs stemming from the conflict.
The latest inflation data shows the real impact of the war on the economy. The Consumer Price Index (CPI) rose 3.3% year-on-year in March, largely driven by a 10.9% increase in energy costs. However, core inflation excluding energy remained subdued at 2.6%, suggesting that price pressures remain contained if the energy crisis is resolved.
Market analysts at J.P. Morgan expect the recovery rally to have a solid foundation to continue. While economic growth may be slightly affected by energy costs, the overall market environment is still considered constructive for equities, especially with the start of the expected positive corporate earnings season.
