Investors are waiting for just one question to be answered: Will there be a quick resolution to the U.S.-Israel war with Iran, or will it be a drawn-out affair? The U.S. economic outlook rests on the outcome. The Atlanta Fed GDPNow model of the latest projection for first-quarter economic growth tumbled to an annual rate of 2.1% Friday, down almost a third from 3.0% just since Monday. Any slowdown in growth would come against a backdrop of a weaker jobs market and stubborn inflation above the Federal Reserve's 2% target. But this week's disruption to oil markets complicates matters. Wolfe Research's Stephanie Roth this week highlighted the big risk in the Iran conflict is energy, noting that a $20 hike in oil prices could mean a 0.1% hit to U.S. GDP, and a 0.4% jump in headline inflation. @LCO.1 YTD mountain Brent, the global oil benchmark, in 2026. The uncertainty around what will happen drove much of the market's wild swings this week. A rough session on Monday was followed by a sharp sell-off and recovery on Tuesday, strong gains on Wednesday, and another major pullback Thursday. Friday was worse. Stocks tumbled once more, as global oil benchmark Brent crude topped $90 a barrel after President Donald Trump demanded an "unconditional surrender" by the Islamic Republic. The oil benchmark began the month trading around $72 a barrel. There's even fear that crude prices could reach $150 per barrel in coming weeks. Qatar's energy minister Saad al-Kaabi told the Financial Times on Friday that such move, spurred by oil and gas tankers unable to pass through the Strait of Hormuz, would "bring down the economies of the world." "It all really depends on how long that conflict lasts," said Charlie Ashley, portfolio manager at Catalyst Funds. "If it's a prolonged war that drags out that causes energy prices to spike for a longer period of time, that's certainly going to have some wider implications that the market will have to adjust to." Inflation The war only heightens the importance of the upcoming inflation data. February's consumer price index, due out next Wednesday, and January's personal consumption expenditures price index, set for release Friday, won't show the spike in oil prices from the war with Iran. But they both will inform the direction of future trends, especially if there's any upside surprise. Stocks tumbled in February after the latest producer price index showed unexpectedly hot wholesale prices, adding sticky inflation to the list of investors' recent preoccupations. Headline CPI is expected to have edged up to 2.4% from 2.3% on an annual basis, according to consensus estimates on FactSet. Core PCE is expected to have held at 3.0%, estimates showed. Higher inflation alongside signs of a weaker labor market also muddies the interest rate outlook. On Friday, the latest nonfarm payrolls report showed that the U.S. lost 92,000 jobs in February , the third time in five months that the labor market contracted. "Significant weakening in the labor market would support a rate cut, but given the risk that higher-for-longer oil prices could trigger another inflation surge, the Fed may feel compelled [to] remain on the sidelines," Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, wrote following the release of the jobs report. That will make Kevin Warsh's job tougher when he takes over the reins as Fed chair in May at the end of Jerome Powell's term. San Francisco Federal Reserve President Mary Daly said Friday the weak February jobs report adds to a difficult policymaking environment . Seeking safety Above-target inflation and a sluggish labor market also confuses the picture for investors. This week the market went topsy turvy as traders raced to position defensively, piling into areas of the market that have underperformed this year in hopes they're less vulnerable, and racing out of recent momentum plays. The U.S. retained its global leadership, showing investors once more why it remains the best house on a bad block. Megacaps perked back up. Software rallied after last month's bloodbath. Gold, silver and South Korea , on the other hand, plummeted on volatile days. Catalyst Funds' Ashley said the uncertain environment has him seeking those areas of the market that have the least downside risk. "It's extremely difficult to assign a probability to any of the outcomes, because it's such a moving target," Ashley said. "What we can do is try to insulate ourselves the best we can from investments that have asymmetrical downside risk," he continued. "And try to concentrate investments into those investments that have better asymmetrical upside." Week ahead calendar All times ET. Monday, March 9 Earnings: Hewlett Packard Enterprise Tuesday, March 10 6:00 a.m. NFIB Small Business Index (February) 10:00 a.m. Existing Home Sales (February) Earnings: Oracle Wednesday, March 11 8:30 a.m. Consumer Price Index (February) 8:30 a.m. Hourly Earnings final (February) 8:30 a.m. Average Workweek final (February) 2:00 p.m. Treasury Budget (February) Earnings: Campbell's Co. Thursday, March 12 8:30 a.m. Housing Starts (January) 8:30 a.m. Initial Claims (03/07) Earnings: Dollar General , Lennar , Adobe , Ulta Beauty Friday, March 13 8:30 a.m. Durable Orders preliminary (January) 8:30 a.m. GDP second preliminary (Q4) 8:30 a.m. Personal Consumption Expenditure (January) 8:30 a.m. Personal Income (January) 10:00 a.m. JOLTS Job Openings (January) 10:00 a.m. Michigan Sentiment preliminary (March)
