The S&P 500 (Index: SPX) recovered during the Good Friday holiday-shortened trading week. The index closed at 6,582.69 on Thursday, 2 April 2026, up nearly 3.4% from its previous trading week's close.

Given that the week featured news of higher oil and fuel prices, which has been a catalyst for falling stock prices in recent weeks, that outcome seems paradoxical. When you add a surprisingly strong jobs report into the mix, it would seem certain the Federal Reserve would be more likely to hike interest rates in upcoming months. After all, the fear of the Fed raising interest rates to fight inflation from the Iran war surge of oil prices has been front and center in financial news headlines in shaping investor expectations of the future.

But the week saw something different with the actual expectations for how the Fed would be setting interest rates through the end of 2026. The CME Group's FedWatch Tool foresees no interest rate changes through the end of 2026, with a much lower probability of any rate hike taking place. The FedWatch tool even sees a growing chance for a quarter point rate cut in 2027, with the most likely timing of that change coming near the end of 2027-Q3.

What's going on is that the oil price surge is now raising the potential of a recessionary contraction in the U.S. economy, which increased after President Trump's mid-week speech boosted the prospect the Iran war would intensify in the near term rather than come to a resolution as had previously been expected. The heightened risk of contraction would forestall the Fed from hiking rates in 2026 and would support the S&P 500 holding onto its gains during the week in the absence of additional information for how that would affect the various parts of the U.S. economy. The latest update of the alternative futures chart shows the rebound:

As the geopolitical event progresses, we're likely to continue seeing an elaborate dance between investors expectations for inflationary pressures related to the disruption of oil markets, interest rates, and the outlook for businesses as the economy copes with all of it. The market moving headlines of the week that was gives a taste of those dynamics:

Monday, 30 March 2026

• Signs and portents for the U.S. economy:
• Oil passed $100 a barrel, with prices expected to keep rising
• Airlines face fare dilemma as fuel spike threatens travel demand
• Chief Fed minion says Fed will stand still on interest rates, Number Two minion says Fed's policy can handle 'unusual' circumstances:
• Powell says Fed can 'wait and see' how war affects inflation
• Fed watching private credit sector for signs of trouble, Powell says
• Fed's Williams says monetary policy 'well positioned' for 'unusual' circumstances
• Fed's faith in anchored inflation expectations may be coming under stress
• Growth signs developing in China:
• China's factory activity seen returning to expansion in March: Reuters poll
• BOJ minions worried about effect of oil and their own monetary policies on Japan's inflation:
• BOJ highlights inflationary pressure from oil, weak yen
• Bigger trouble developing in the Eurozone:
• German inflation spikes to 2.8% in March as energy costs soar
• ECB minions starting to think they may not have the perfect monetary policy they thought:
• ECB must respond quickly to signs of inflation drift, says Stournaras
• Villeroy says ECB ready to act, but too early to discuss timing of any rate hike
• Wall Street's major averages ended mostly lower to kick off the holiday-shortened week
• S&P 500 is on pace for its worst month since 2022 as broad selloff deepens
• Wall Street indexes mostly fall as Iran war widens

Tuesday, 31 March 2026

• Signs and portents for the U.S. economy:
• Oil Falls on Signs From US, Iran of Openness for War Resolution
• Iran reiterates willingness to end war but needs guarantees- reports
• WTI, June Brent crude futures slide on report that Iran may be ready to end war
• US pump prices hit $4 a gallon
• Private lenders delay reckoning with payment concessions on stressed debt
• US single-family home prices rise moderately in January, FHFA says
• Fed minion warns against letting down guard against inflation:
• Fed's Schmid warns against complacency on inflation
• Bigger trouble, stimulus developing in China:
• China set to extend fuel export ban with small exemptions, sources say
• China's smaller independent refiners to curb output on rising oil prices, sources say
• China to maintain appropriately loose monetary policy
• Bigger inflation developing in Eurozone, ECB minions excited to test their new models of inflation expectations:
• Euro zone inflation surges past ECB target on oil shock
• ECB's new models may help capture shifts in inflation expectations, blog post says
• Nasdaq surged nearly 4% as Wall Street closed higher on potential Iran war resolution news
• Wall Street rallies as traders bet on potential war off-ramp
• S&P 500 Earning Estimates Are Surprisingly Rising And $100 WTIC Oil Is Not Expensive

Wednesday, 1 April 2026

• Signs and portents for the U.S. economy:
• Oil slides after Trump says US will end its war on Iran soon
• Auto industry group calls for scrapping US gas tax, adopting vehicle fee
• Recession odds down sharply after string of better-than-expected economic data
• US mortgage rates jump to 6.57%, highest since August, MBA says
• Fed minions thinking oil price spike is short term event:
• Exclusive: Fed's Barkin says households, firms still see oil shock through a "short-term lens"
• Bigger trouble, growth signs developing in China:
• Factory input costs soar worldwide as Iran war snarls up supply chains
• China's new home prices rise in March; big cities see seasonal pickup, private survey shows
• New BOJ minion worried about potential for stagflation in Japan's economy:
• New BOJ board member warns of stagflation risk from Iran war
• Bigger trouble developing in Eurozone, ECB minions continuing to stand by for action:
• Euro zone factories see jump in input costs, supply snags, survey shows
• Euro zone economy may already be on ECB's 'adverse' path, policymaker warns
• U.S. equities ended higher as hopes of Iran conflict de-escalation lifted sentiment
• Wall Street ends higher on speculation about end to Iran war

Thursday, 2 April 2026

• Signs and portents for the U.S. economy:
• Oil prices jump over 7% after Trump says attacks on Iran will continue
• Instant View: Investor reactions to Trump's speech on Iran war
• US labor market posts big gains, war risks mount
• VIEW US jobs report for March is stronger than expected, likely keeping Fed on sidelines
• Fed minions disappointed U.S. oil production not ramping up faster:
• Fed's Logan says US oil producers unlikely to provide near-term relief for consumers
• Bigger trouble developing in China:
• China services activity growth cools in March, private PMI shows
• Former BOJ minion thinks supply disruptions may force BOJ to put aside rate hike plans, but they don't want to give them up:
• BOJ may be overlooking real risk from Iran war, says ex-c.bank official
• BOJ keeps rate hike door open even as Iran war squeezes firms
• ECB minions starting to worry a bit about Eurozone economy:
• Energy crisis raises concerns for financial stability, ECB's Panetta warns
• German institutes cut growth forecast as Iran war drives inflation higher
• Wall Street ended mixed as investors digested U.S.-Iran war developments
• Wall Street ends mixed as worries linger before Good Friday break

The Atlanta Fed's GDPNow tool forecast of real GDP growth in 2026-Q1 slowed to +2.0%, declining from the +2.0% growth anticipated a week earlier.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a suit-wearing Wall Street bull and bear who look confused after reading a news ticker that says 'OIL PRICES UP' and 'JOBS GOOD' and 'NO RATE CUTS' and 'NO RATE HIKES EITHER'". We made some minor tweaks to the colors of the words in the generated image and their layout to produce the featured cartoon.