Weekly Market Recap
Market trading was influenced by ceasefire headlines this week.
The S&P 500 rose early after the administration reported talks with Iran, then reversed to close down nearly -0.5% as Iran denied negotiations and the diplomatic window narrowed.
Meanwhile, the market rotation from early 2026 resumed, with small caps, value stocks, and the equal-weight S&P 500 outperforming. Oil dropped nearly -10% on Monday’s ceasefire headline before recovering to close the week down roughly -5%.
Treasury yields ended the week higher despite falling mid-week, credit spreads tightened modestly, and the VIX remained elevated.
The week ahead brings the expiration of Trump’s five-day strike pause on Iranian energy infrastructure, along with consumer confidence and ISM Manufacturing PMI, the first major economic data releases that will capture the full impact of the war and the oil shock.
Key Takeaways
Oil Prices Remain Volatile
Oil markets whipsawed this week as ceasefire headlines between the U.S. and Iran drove sharp swings in both directions. Prices plunged more than -10% early in the week after President Trump described productive discussions and announced a five-day pause in strikes, raising expectations for a diplomatic resolution.
Those gains reversed when Iran denied active negotiations and later rejected a formal U.S. ceasefire proposal that included reopening the Strait of Hormuz, which remains closed. Iran’s counteroffer signals that diplomatic channels are open, but no agreement is imminent.
Bottom Line: Oil prices are unlikely to stabilize until there is clarity on whether negotiations can produce a lasting agreement. Each headline-driven swing is a reminder of how much geopolitical premium remains embedded in energy markets, as well as the stock market.
Markets Traded on Ceasefire Headlines
U.S. equities traded higher early in the week, but reversed lower as the week progressed. The S&P 500 rose over +1%, with most of the advance coming Monday after reports of U.S.–Iran negotiations sparked a broad relief rally.
Markets then pulled back the following session as oil rebounded and uncertainty around a deal resurfaced, staged a rebound when news of a formal ceasefire proposal emerged, and ultimately traded lower as tensions escalated again.
Bottom Line: Stocks remain highly sensitive to ceasefire signals, with the direction of oil prices serving as the most reliable real-time indicator of investor confidence in a diplomatic outcome.
The Stock Market Rotation Resumes
Market leadership broadened again this week as the rotation away from mega-cap stocks reasserted itself. The Russell 2000 outpaced the S&P 500 during the early week rally, and the equal-weight S&P 500 outperformed the cap-weighted index as value stocks pulled ahead of growth.
The divergence is consistent with the trend that emerged in early 2026, when investors began moving toward smaller companies, value stocks, and more economically sensitive areas of the market.
Bottom Line: The rotation paused during the market volatility, but it started to reappear this week. One week doesn’t confirm a trend, but the broadening is showing up across multiple measures simultaneously, which is more credible than small-cap leadership alone.
Rate Hike Probabilities Creep Into Fed Pricing
Interest rate expectations shifted again this week as investors began pricing in the possibility that the Federal Reserve could raise rates later in 2026. Futures markets showed rate-hike probabilities rising above 50% in late 2026, with the market starting to price in a rate hike due to concerns that a sustained rise in oil prices will reignite inflation.
At the same time, inflation expectations have reversed slightly lower, suggesting markets still view the current inflation pressures as temporary rather than structural.
Bottom Line: The debate has shifted from the timing of cuts to the possibility of a brief hike, and that repricing matters for duration positioning. If oil stabilizes and inflation expectations remain anchored, the probability of a rate hike could fade.