S&P 500 slides after CPI data as oil finishes the week with biggest decline in six years

US stock markets ended Friday’s session with mixed performance as investors weighed hotter-than-expected inflation data against hopes for a peace negotiation between the United States and Iran. Crude prices fell, with oil posting the sharpest weekly decline since 2020 as a fragile ceasefire remained in place.

Stocks end mixed as inflation data offsets Iran hopes

At the close, the S&P 500 fell 0.11% to 6,816.89. The Dow Jones Industrial Average declined 269.23 points, or 0.56%, to 47,916.57. The Nasdaq Composite rose 0.35% to 22,902.89, supported by gains in chip stocks including Nvidia and Broadcom.

For the week, the S&P 500 gained 3.6%, the Nasdaq rose 4.7% and the Dow added 3%. It marked the best weekly performance for all three indices since November last year.

Ceasefire developments and Hormuz traffic remain limited

The rally on Wall Street this week was driven by the US–Iran ceasefire announcement on April 7. Officials from the United States and Iran were expected to hold talks later this weekend in Islamabad, Pakistan, with Pakistan hosting as mediator.

Much of Islamabad was locked down on Friday ahead of the talks. Meanwhile, traffic through the Hormuz Strait remained light, with no clear signs of meaningful progress since the ceasefire, Reuters reported.

On Friday, U.S. President Donald Trump continued to criticize Iran, saying the country is pressuring the world by blocking the Hormuz Strait. In a Truth Social post, he said Iran appeared to realize it had no other cards. On Thursday, Trump warned Iran not to toll ships passing through the Hormuz Strait.

Oil slides on uncertainty over Hormuz reopening

Oil prices swung during Friday’s session as the outlook for Hormuz reopening remained uncertain. At the close, Brent crude settled at $95.20 per barrel in London, down 0.8%. WTI settled at $96.57 per barrel in New York, down 1.3%.

Although oil prices remained below triple digits, inflation concerns continued to weigh on investors this week. For the week, Brent fell 12.7%, its largest weekly drop since August 2022. WTI fell 13.4%, the largest weekly decline since April 2020.

Inflation data keeps pressure on rate expectations

US inflation data released this week showed price pressures rising in the world’s largest economy. According to a Labor Department report dated April 10, March CPI increased 0.9% month over month, the strongest since June 2022. The major contributor was a 10.9% rise in energy items.

Earlier, a March 9 Commerce Department report showed the Personal Consumption Expenditures (PCE) price index up 3% year over year in February, above the Fed’s 2% inflation target.

Analysts expect inflation to stay hot in the coming months as higher gasoline prices seep into the economy, making it harder for the Fed to cut rates this year and possibly requiring rate hikes.

Consumer sentiment weakens as inflation expectations rise

Inflation fears have cooled consumer confidence in the United States. The University of Michigan’s consumer sentiment survey released on April 10 showed sentiment at the lowest level on record. Inflation expectations for the next 12 months rose to 4.8%, up 1 percentage point from the March reading.

Market view: de-escalation hopes, but inflation risk remains

Tim Holland, chief investment officer at Orion, told CNBC that the Fed will do its best to ignore the March and April data, arguing the inflation uptick is temporary in the context of the US–Iran war. Holland believes the confrontation will de-escalate and that oil will weaken, but he cautioned investors to focus more on inflation risk if by mid-June WTI remains near $100 per barrel.

He added that weaker consumer confidence combined with higher inflation expectations could have negative macro effects and place the Fed in a difficult position.

Oil market tightness risk and supply contingency plans

The key question for the oil market now is when Hormuz will reopen, with no sign of opening at present. If Gulf supplies remain blocked, oil could rebound, according to a Commerzbank report.

Traffic through Hormuz remains well below normal levels, and most vessels passing through the strait on Friday were Iranian-related, according to Reuters’ ship-tracking data.

Analysts forecast that the supply shock from the US–Iran conflict could leave the global oil market tight this year. Before the conflict, the world expected an oversupply in 2026. Some Middle Eastern producers have proposed that Asian refiners plan shipments in April and May in case Hormuz reopens, Reuters reported.

Additionally, sources say the Trump administration may extend waivers on Russian oil and oil products to allow continued purchases from Russia to supplement supply to the market.