For the first time in nearly four years! The three major U.S. stock indices have experienced five consecutive weeks of decline. When will the panic sentiment end?

Market sentiment seems deeply tied to developments in the Middle East and the direction of oil prices.

Because the Trump administration in the United States and Iran have failed to send a unified signal on how to reach a ceasefire agreement, U.S. Treasury yields surged sharply this week. The market is worried that elevated crude oil prices will push up inflation, and U.S. stock indexes fell in response.

Among them, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite all suffered losses for a fifth consecutive week, marking the longest losing streak in nearly four years. The Dow is down more than 10% from its historical closing high on February 10, becoming the latest major index to confirm it has entered a correction phase, after the Russell 2000 and the Nasdaq. Over the next week, geopolitical factors may continue to dominate the market. Investor sentiment remains tightly linked to the Middle East situation and the oil price trend, and the extension of the front line could mean that economic risks gradually accumulate.

Economic pressure is gradually becoming apparent

A series of data released by the United States this week was relatively weak. Given the high uncertainty brought by the Middle East situation, softness in the data is in line with expectations.

S&P Global U.S. Manufacturing PMI rose from 51.6 in February to 52.4, above the expected 51.3. New orders logged the largest increase since October 2025, driven mainly by stabilization in export demand. However, the S&P Global Services PMI, which accounts for more than 60% of the U.S. economy, fell from 51.7 in February to 51.1, the lowest level in 11 months.

University of Michigan consumer confidence fell 6% month over month to 53.3, below the expected 55.5, the lowest since December 2025. Inflation expectations for the coming year jumped from 3.4% in February to 3.8%, recording the largest month-over-month increase since last April.

The Federal Reserve Bank of Atlanta cut its real-time GDP forecast for Q1 from 2.3% last Friday to 2.0%. Bob Schwartz, a senior economist at Oxford Economics, said in an interview with First Financial that this round of Middle East conflict casts a shadow over the economic outlook. The situation could move from a moderate and easing pattern to a severe oil shock. “Our baseline forecast is that the economy will continue to expand, even if consumers have to bear the main pressures caused by rising energy prices and thinner savings buffers. But if oil prices stay above $140 per barrel for a long time, that would be enough to push the U.S. economy into a recession.”

Two Federal Reserve officials on the 27th said the conflict poses new challenges to the U.S. economy, and they have therefore joined an increasing number of policymakers who are worried about the post-conflict fallout. Anna Paulson, chair of the Federal Reserve Bank of Philadelphia, said the conflict brings “new risks” to inflation and economic growth. Tom Barkin, chair of the Federal Reserve Bank of Richmond, said the conflict makes the demand outlook more complex. “An increase in oil prices not only hurts consumer confidence, but also affects prices of other products such as air travel, freight, and shipping. These price increases crowd out spending in other areas.”

U.S. Treasury yields continued to rise this week, and the yield curve further flattened. Compared with last Friday, the 2-year Treasury yield, which is closely tied to rate expectations, rose by about 5 basis points to 3.934%. The benchmark 10-year Treasury yield rose by about 4 basis points to 4.424%, the highest level since July last year. The CME FedWatch tool shows that participants in the money markets currently expect the Fed not to cut rates this year, and the probability of rate hikes has risen to 25%. Before the outbreak of the conflict, the market had expected two rate cuts.

Schwartz believes that if oil prices remain high, the biggest downside risk will be transmitted through the stock market and the labor market. “A more severe pullback in the stock market could weigh on consumption spending by high-income groups; if layoffs accelerate from here, the savings buffer that families already have is unlikely to withstand the shock.” However, he thinks the impact of the conflict on investment will be differentiated. For example, spending related to artificial intelligence is still expected to maintain an upward momentum, but a prolonged conflict could bring underestimated risks to semiconductor supply chains and power supply. As companies delay decisions and wait for the outlook to become clearer, the boost effects brought by the Trump “big and beautiful” bill in the short term may also be weakened.

When will the market stabilize?

This week, all three major U.S. stock indexes logged losses for a fifth consecutive week. The Nasdaq Composite fell 3.2% in the week, its biggest weekly drop since March last year; the S&P 500 and the Dow fell 2.1% and 0.9%, respectively.

The communication services, technology, and consumer discretionary sectors were the worst-performing sectors over the past week. This indicates that, driven by concerns about inflation, expectations for easing monetary policy this year have largely faded, and the outlook for economic growth has been dealt a heavy blow.

The last time growth stocks saw such large-scale selling was in April 2025, when Trump threatened to impose sweeping tariffs, triggering near panic in the market. Alphabet, Google’s parent company, plunged nearly 9% this week, while Microsoft crashed nearly 7%. Nvidia and Amazon each fell about 3%, and Tesla slid nearly 2%. Meta became the worst-performing tech giant, with its share price dropping more than 11%. Previously, the company suffered disastrous outcomes in two key lawsuits, further worsening the predicament of this social media giant.

As investors pulled back heavily from tech stocks, market focus shifted to Tesla and the next moves of trillion-dollar companies owned by Musk. SpaceX, whose valuation is expected to reach $1.25 trillion after its merger with xAI last month, is expected to file for an IPO soon and could become the largest IPO in history. Tesla will release its quarterly delivery data next week.

In its market outlook, Charles Schwab wrote that investor sentiment has been dragged down by the Middle East conflict, higher oil prices, and rising U.S. Treasury yields, and therefore the downtrend in major stock indexes is unlikely to stop. With a steady stream of news about the conflict, negotiation progress is currently not clear. But Wall Street clearly believes that the longer the conflict lasts and the longer oil prices stay high, the greater the negative impact on the global economy. In addition to geopolitical factors, U.S. Treasury yields have continued to rise, and several key points on the yield curve are under pressure—2-year Treasury yields touching 4.0%, 10-year touching 4.50%, and 30-year touching 5.0%.

Looking ahead to next week, the firm believes that beyond progress on the conflict and the trajectory of oil prices, other factors may be of little consequence to investors. From a technical perspective, the market is already in an oversold condition in the short term, but as multiple key support levels have been broken, the technical picture has been somewhat damaged. Now the market’s fate seems to be deeply tied to the Middle East situation and the oil price trend. If the U.S. and Iran reach a ceasefire agreement, or if there is a substantive easing of the situation, given that the market is already oversold, the stock market will almost certainly rebound sharply. Since it is impossible to predict whether and when such events will occur, a pattern of sharp volatility may still persist.

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Editor: Jiang Yuhan