Stock market investors will be closely watching next week’s employment figures as financial markets grapple with the economic impact of an Iran conflict now in its second month.
The ongoing Middle East crisis continues to dominate market sentiment, particularly as it disrupts oil supply chains. Crude oil prices have skyrocketed more than 60% since the beginning of the year, approaching $100 per barrel and pushing gasoline costs to $4 per gallon nationwide. These rising energy costs threaten to reduce consumer spending power.
Inflation concerns have driven benchmark Treasury yields to their highest levels since last summer, creating additional pressure on stock valuations. Thursday’s sharp market selloff positioned the S&P 500 for its fifth consecutive weekly decline, marking a nearly 6% drop since U.S.-Israeli military actions against Iran began in late February. The Nasdaq Composite has fallen more than 10% from its October peak, officially entering correction territory.
Market volatility has been driven by conflicting signals about potential conflict resolution, keeping stocks sensitive to breaking news developments, according to Jim Baird, chief investment officer with Plante Moran Financial Advisors.
“Any signs of positive breakthroughs in terms of discussions with Iran and a cessation of the conflict there would go a long way towards providing some reassurance to investors and a boost in sentiment,” Baird said. “Anything that would lead to indications that this might become more long and drawn out, that would be a negative for investor sentiment and certainly would weigh on the market.”
Tuesday marks the conclusion of a challenging first quarter for American equities. Beyond the Iran situation, market concerns include business disruptions from artificial intelligence developments and weakness in private credit markets. The S&P 500 has declined more than 5% in 2026, breaking a three-year streak of strong double-digit gains.
“There’s a lot of uncertainty out there overall,” said James Ragan, co-CIO and director of investment management research at D.A. Davidson. “So as we get into the last couple of days of the quarter, I just think you could see the market sentiment kind of rolling over a little bit.”
March employment data is projected to show 48,000 new jobs added with unemployment holding at 4.5%, based on Reuters polling. The report will be released April 3, coinciding with the Good Friday market closure.
February’s employment report delivered disappointing results with 92,000 job losses. With two of the last three monthly reports showing negative job growth, “any positive number would probably be good for the market,” Ragan noted.
Additional economic indicators due next week include February retail sales figures and manufacturing and services sector reports.
Employment market deterioration previously prompted Federal Reserve rate cuts last year. However, the central bank faces a difficult position if job market conditions worsen further.
With inflation already exceeding the Fed’s target, surging energy costs complicate potential rate reductions. Financial markets now anticipate no additional rate cuts this year, with fed funds futures indicating a small possibility of rate increases in 2026, according to LSEG data through Thursday.
The benchmark 10-year Treasury yield has risen to 4.4% from approximately 4% before the conflict began.
“The equity market is also taking very careful notice” of rising yields, said David Bianco, Americas chief investment officer at DWS. “This affects so many things,” he said, including mortgages, the debt sustainability of the U.S. government and what is a fair price-to-earnings valuation.
Market valuations have indeed adjusted downward recently. The S&P 500’s price-to-earnings ratio, calculated on forward 12-month earnings estimates, currently sits just below 20, down from over 22 at year-start, according to LSEG Datastream. This ratio still exceeds the long-term average of 16.
Market participants are analyzing how the conflict and resulting energy price increases might affect corporate earnings. Despite higher fuel and operational costs, companies like Delta Air Lines and FedEx have recently delivered encouraging reports. Nike will announce quarterly results Tuesday, while the majority of first-quarter earnings reports arrive in coming weeks.
“I think the U.S. economy remains a safe distance from recession,” Bianco said. “We can debate the odds of recession going up as oil prices go up, but I still think we are a safe distance from a recession being likely.”
