Wall Street experienced a tumultuous Friday, with the Dow Jones Industrial Average officially entering correction territory, dropping roughly 1.1% to close below 45,500. The S&P 500 also took a hit, falling 1.8% and marking its fifth consecutive weekly decline, a losing streak not seen since 2022. The tech-heavy Nasdaq Composite mirrored the trend, sliding 1.3% after entering correction territory the previous day.
The ongoing war between Iran and its impact on global oil supplies remain a primary driver of market unease. Brent crude, a global benchmark, briefly topped $110 a barrel as disruptions in the Strait of Hormuz persisted. Analysts suggest that further escalation of the conflict, particularly damage to Iranian export facilities, could send oil prices soaring as high as $200 a barrel. The average cost of gas nationwide is $3.98 per gallon.
Adding to investor anxieties is the growing expectation of potential Federal Reserve rate hikes. Futures traders are now pricing in a 52% probability of a rate hike by the end of 2026, a significant shift from earlier in the year when rate cuts were anticipated. This expectation is fueled by rising inflation, with the OECD recently raising its U. S. inflation forecast for 2026 to 4.2%, nearly double the Federal Reserve's projection.
Consumer sentiment is also on the decline, according to a University of Michigan survey. The survey revealed a drop in consumer sentiment across various demographics, coupled with rising inflation expectations. This combination of factors has amplified concerns about potential stagflation, further weighing on market performance.
