Blockade Blues: Stocks Down, Oil Up as Talks Fail

By Joe Mazzola

(Monday market open) Weekend talks ended with no progress toward ending the war or opening the Strait of Hormuz, so crude's overnight spike and war tidings will likely dominate trading as Goldman Sachs (GS) kicks off earnings season. President Trump announced a U.S. blockade of the strait Sunday, sending stocks on a downward spin and threatening last week's healthy index gains. Stocks recovered slightly after Trump clarified the blockade only affects ships into and out of Iranian ports, an important distinction. Still, oil's up nearly 8% and back above $100 per barrel.

The ceasefire expires next week, and a Navy blockade might raise concerns about fresh tension on the high seas. Even if the situation improves, things likely won't go right back to normal for the bruised U.S. economy, though it depends less on oil from the Middle East than it once did. Crude prices everywhere reflect global supply and demand trends. "There's growing concern, both in Washington and among investors, that no matter how quickly the war ends, the economic fallout is likely to last for months," said Michael Townsend, managing director of legislative and regulatory affairs at Schwab.

Stocks closed mixed Friday in a tepid session after the March Consumer Price Index (CPI) rose dramatically due to energy costs. On a positive note that day, the PHLX Semiconductor Index (SOX) set a new all-time high. For the week, the S&P 500 Index rose more than 3%, its best weekly gain since November, as the ceasefire began. "Many questions remain about the ultimate outcome of the war," the Schwab Center for Financial Research (SCFR) noted in its latest look at the conflict and potential market impact. "First, and most immediate, is whether the truce will hold up. A two‑week pause lowers the probability of immediate escalation, but such arrangements can prove fragile, particularly when key strategic issues remain unresolved."

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