Wall Street just had its worst week in a year, and the culprit is not AI fatigue, earnings misses, or trade wars. It is crude oil — surging relentlessly on the back of an escalating conflict in the Middle East — and it is dragging everything else down with it.
The S&P 500 fell 1.5% on Friday to close its fourth consecutive losing week, the longest such streak in over a year. The Nasdaq tumbled 2%. The Dow shed 443 points. Brent crude settled at $112.19 per barrel, up 3.3% on the day alone. U.S. benchmark crude hit $98.32. For context, oil was trading around $70 before the conflict began. That is a 60% spike in a matter of weeks.
But the real damage is happening in the bond market. The 10-year Treasury yield jumped to 4.38%, up from 3.97% before the war escalated. That move alone is devastating for rate-sensitive sectors. Higher yields mean higher mortgage rates, higher corporate borrowing costs, and lower present values on growth stocks. The Russell 2000, packed with smaller companies that rely on cheap debt, dropped a market-leading 2.3%.
Here is where it gets ugly for the bulls. Traders have essentially canceled all bets on Federal Reserve rate cuts this year, according to CME Group data. Before the war, the market was pricing in at least two cuts. Now? Some traders are actually pricing in a small probability of a rate hike in 2026. That is a scenario that was virtually unthinkable just a month ago.
The S&P 500 also broke below its 200-day moving average for the first time in over 200 trading sessions — a technical signal that has many analysts warning about a deeper trend reversal. Both the Dow and Nasdaq are approaching formal correction territory, defined as a 10% decline from their February highs.
Adding to the chaos, Friday was a “triple witching” event — the quarterly expiration of stock options, stock index futures, and stock index options — which amplified volatility across the board. Super Micro Computer cratered 33% after the U.S. government accused a senior executive of conspiring to smuggle Nvidia chips to China. Roughly three out of four S&P 500 stocks finished in the red.
The historical playbook says markets tend to bounce back from geopolitical shocks relatively quickly — as long as oil prices do not stay elevated for too long. “If three months from now we are in a similar situation, not only myself but a lot of other investors will be much more cautious,” said Ann Miletti, head of equity investments at Allspring Global Investments. The message is clear: oil at $112 is manageable. Oil at $112 for six months is a different animal entirely. Traders should be watching crude prices more closely than any earnings report right now.
