US Stocks Close Lower After Jobs Disappointment, but Outperform Global Peers In Week One of Iran War

Key Takeaways

• While US stocks declined amid disappointing jobs data on Friday, the impact of the war in Iran has been relatively benign this week.
• Oil prices spiked to their highest level since April 2024 on Friday, with WTI crude surpassing $90 per barrel.
• European stocks had worst week since the start of the Ukraine War, while Asian stocks recorded their worst week since the pandemic.

US stocks fell on Friday on weaker-than-expected jobs data and as waning hopes of a quick end to the Iran war reignited jitters. Still, they have outperformed their European and Asian peers since the beginning of the conflict last weekend.

The Morningstar US Market Index closed 1.4% lower on Friday and 2.2% lower for the week. The S&P 500 Index was down about 1.3% on the day, while the tech-focused Nasdaq 100 lost 1.6%.

Surprisingly weak jobs numbers reignited fears of a stagnant labor market at the same time the war in Iran has fueled concerns about inflation.

Nonfarm payroll data showed the US economy unexpectedly shed 92,000 jobs in February, while unemployment ticked up to 4.4%, adding to concerns of a slowdown in the labor market.

The payroll data was a “bracing splash of cold water for investors who assumed the US economy could emerge unscathed from both the AI productivity revolution and capricious government policy zigzags,” writes Peter Graf, chief investment officer at Amova Asset Management Americas. He notes that with a supply shock in oil markets “seemingly likely to lift prices higher, 2022-style stagflation concerns will now return to the fore.”

February US Jobs Report: 92,000 Fall in Payrolls Far Worse Than Expected

Meanwhile, dampening hopes for a swift end to hostilities, President Donald Trump said Friday that there would be no deal to end the US-Israeli war in Iran without Tehran’s “unconditional surrender.” European stock declines accelerated following the comment on Truth Social.

Oil prices continued their march higher, following sharp swings through the course of the week, as investors digested more and more signs that the closure of the critical Strait of Hormuz may well last weeks. Brent crude oil was up as much as 9.7% Friday to $94 per barrel, its highest level since April 2024. WTI crude was up as 13% to $91.

Among individual US stocks, chip maker Marvell Technology MRVL was the standout performer, rallying 18% after reporting “strong fiscal fourth-quarter results and an even better, raised outlook for fiscal 2027 and fiscal 2028,” according to Morningstar analysts.

International Stocks Hit Harder Than US Stocks Amid Energy Price Sensitivity

“The US economy is energy independent and does not rely on large imports of oil and gas, unlike Europe and Asia. Hence the dollar has strengthened, while US stocks have fallen less than elsewhere and Treasury yields are up less than in the UK,” says Paul Jackson, global markets EMEA strategist at Invesco.

The Morningstar Europe Index fell again on Friday, notching a weekly loss of more than 7% in dollar terms, its worst week since 2022.

Markets whipsawed this week as investors digested the US-Israeli war with Iran, which broke out over the weekend and quickly escalated into a regional conflict, choking off energy exports and disrupting maritime and air traffic.

With East Asian economies heavily reliant on imports of energy products from the Middle East and on the back of a rally in the prior year, the region’s equities have suffered the worst declines among major regions. The Morningstar Asia Index closed the week down 5.2%, its worst weekly performance since the depths of the covid-19 pandemic selloff in March 2020. Korean stocks have been particularly volatile, as government intervention in the form of a $68 billion stabilization package reversed more than 12% of declines during Wednesday’s session.

“When it comes to stock markets, we believe the US is less cyclical than in Europe, which is good if economies are threatened,” Invesco’s Jackson says.

“What’s remarkable is the US indices have barely budged this week,” says Neil Wilson, investor strategist at Saxo UK. “It suggests that the prime focus is on energy flows in the Strait of Hormuz, which is primarily a Europe/Asia problem.”

What Comes Next?

Investors are now watching closely for the latest developments out of the Middle East, including continued disruptions to energy flows, with analysts pricing in further potential swings.

“It would take something special to reverse course at this point, some amazing earnings from big global names could help, but sentiment is hard to change and right now it’s in cautious mode,” says Morningstar chief European markets strategist Michael Field.

The ongoing conflict and the likelihood of higher energy prices has also raised the specter of inflation, prompting traders to reconsider their forecasts for central bank rate cuts.

US Treasury yields climbed this week, with the 10-year benchmark bond ticking up slightly Friday to 4.175%. Gold prices hovered at $5,088, struggling to maintain momentum on waning rate cut bets.

Money market traders are now expecting the Federal Reserve to lower interest rates by a total of 0.35 percentage points this year, down from 0.55 points last week, according to Reuters.

“Investors are dialing back hopes for near-term rate cuts as higher energy costs threaten to filter through to consumers and keep price pressures elevated. Equities have been volatile in response, with Europe bearing the early brunt of investor concern,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown.

James Gard and Sarah Hansen contributed to this story.