Hello, I'm Eric Criscuolo, Market Strategist at the New York Stock Exchange, and this is Market Storylines. Every week we’re here to keep you up to date on the key trends and events driving global markets. We’re recording on Thursday, March 12. Now let’s dive in.

Not to be Captain Obvioius, but it’s all about what’s happening in Iran. Last week global markets moved lower in response to the conflict. More specifically, it was the response to oil ripping higher. Crude had been steadily rising since the beginning of the year, with momentum accelerating the past several weeks as the US moved military assets into the region. That momentum jumped last week, like a prime Dominque Wilkins, as Brent Crude shot up almost 30%.

The S&P 500 fell 2% while small and midcap indices were down ~4%. The US outperformed most global markets though, and mega cap tech benefitted from a flight to quality which made the NYSE FANG+ index a standout, ending the week up nearly 3%.

We’ve gotten accustomed to markets looking past military conflicts, if not immediately than in short order. For example, when the US bombed Iranian nuclear facilities in June last year, the S&P ended that week over 3% higher.

The strikes on Iran continued throughout the weekend and concern about passage through the Strait of Hormuz, which my colleague Michael discussed last week, started to really ramp up. That is a key differentiator this time around. With headlines coming fast, the S&P 500 traded in an almost 200 point range on Monday but ended higher by almost 1%. Meanwhile oil saw a giant $40 range, between $80 and $120 before settling around $100 per barrel, up about 4%.

The price action late in the day on Monday was a telling sign- equites jumped and crude fell after President Trump said quote “I think the war is very complete, pretty much”, end quote. The market is balancing the likelihood of a rally on deescalation- see the tariff episode for further details- against a more significant decline should hostilities continue and oil remain highly elevated for an unexpectedly long time.

As we moved through the week those concerns about the length of the conflict rose, and the situation in the Strait deteriorated, with multiple ships coming under fire, transit effectively blocked and Iran hitting energy infrastructure throughout the region. The US was looking into providing naval escorts for commercial shipping, along with backstopping insurance. However on Thursday Secretary of Energy Chris Wright said the Navy is not ready to escort ships, as the fleet is fully engaged in operations against Iran, though he added it will happen “relatively soon”.

The resiliency in the first half of the week is getting stressed today. The S&P 500 is down over 1% and the weakness is broad as most other major indexes are similarly lower. The S&P is at a key level, trading right around 6700 and testing the low-end of the range it’s been in since late November. We’ve watched buyers constantly buy dips, especially anytime the index tested its 100 day average. That support line failed on Friday. Further weakness puts the 200d moving average, currently at 6600, or 100 points lower, in play. We haven’t seen the 200 day tested since May of last year, right after the Tariff Tantrum.

Mega caps have been a source of relative strength, especially the growth/tech names. The NYSE FANG+ Index is about flat this week while the ICE Semis index is up 2%, though that includes a 3% drop today.

We saw signs of a return of the Semis over Software trade this week. Software has been under pressure since the Fall on ramping concerns of AI disruption. That trade started to unwind in late February as software began to work again, but this week the ICE Semis Index was significantly outperforming the IGV software ETF. That was until today. Oracle had very good results this week, which could help support the software group in the near-term.

In the first part of the week you saw some of the riskier, high-beta areas trade well, including quantum computing stocks, neoclouds and biotech. Short covering could have been a part of that performance as books derisked and cut gross exposure. Those areas are all lower today in a broader risk-off environment.

Credit-linked equities were trading mixed until Wednesday when the major Private Credit stocks started coming under increasing pressure as more concerns emerged, including JP Morgan marking down values of loans to private credit groups. Financials are the worst sector overall this week. A flattening yield curve is not helping the banks.

Industrials are only a little better than Financials as the sector sells off after outperformance year-to-date. Energy is the best sector this week for obvious reasons. Tech is near the top as semis were strong until today. Despite the significant backup in yields, Utilities are playing their defensive role pretty well. Consumer Staples, another defensive sector, is trading about inline with the market. Disappointing earnings from Campbell’s is weighing on the group.

Yields and the Dollar have also seen significant moves. The Dollar continued to rise this week and the US Dollar Index is almost back to 100, up from 97.50 at the end of February. The Dollar strengthened against most other major currencies, including the typical safe havens Yen and Swiss Franc. Higher oil has supported the Dollar, given the US’ energy independence versus others.

Treasury yields were already marching higher before this week. The real action has been at the front end. 2 year yields are up almost 20bp this week, including 10 bp today. 30y yields are up half that as the curve flattens out. As oil rips and stokes inflation fears, the market is now pricing in less than one cut by the Fed for the rest of the year, down from just over 2 cuts a month ago. We’re also probably seeing some unwinding of a steepener trade that was popular, further pressuring the short end. Next week’s Fed Rate decision is getting a lot more interesting.

Quickly on crypto, Bitcoin has played like a risk-off asset this week, gaining 3%. The correlations between it and other assets as this situation continues should bear close watching.

Now, let’s take a look at what’s coming up. Outside of Iran, it’s all about interest rate decisions. The Fed’s meeting on Wednesday will be the key market event, but we also get decisions from the ECB, Japan, UK and Australia.

Earnings will include some important consumer updates from Dollar Tree, lululemon, General Mills and Darden Restaurants. Micron, Docusign, and Accenture will provide key insights into AI spending and disruption, or lackthereof, and FedEx will assume its position as a key barometer of the global economy. Lastly, if you’re not watching the World Baseball Classic, I suggest you carve out some time. Team USA moved on to the semifinals after Italy beat Mexico, and a Czech electrician shut out a stacked Team Japan for 4 innings.

That’s a wrap for this week. You can watch Market Storylines on TV.NYSE.com or on the NYSE YouTube Channel. You can also listen on the Inside the ICE House Podcast feed. Thanks for joining me. I’m Eric Criscuolo. We’ll see ya next week.