S&P 500, Nasdaq, Dow Jones: Analysts Discuss Impact of Iran Situation and FOMC on Stock Market

Investing.com - The S&P 500 index fell on Friday, oil prices continued to rise, and investors awaited further developments in the Iran conflict.

The benchmark index declined 0.61%, closing at 6,632.19 points, about 5% below its recent peak. The Nasdaq Composite dropped 0.93%, ending at 22,105.36 points, while the Dow Jones Industrial Average fell 119.38 points, or 0.26%, to 46,558.47 points.

The S&P 500 also hit a new low in 2026 on Friday. This week, the index declined 1.6% and experienced its first three-week losing streak in about a year. The Dow fell about 2% this week, while the tech-heavy Nasdaq dropped 1.3%.

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This week, investors are waiting for clearer information on how the Middle East conflict will impact this year’s rate cut expectations. Federal Reserve policymakers will hold their first meeting since the U.S. and Israel launched airstrikes on Iran about two weeks ago. These strikes triggered a surge in oil prices, affecting the entire financial market.

During the two-day meeting, officials are expected to weigh how the energy shock might influence inflation and economic growth. The Fed will also release its latest economic forecasts on Wednesday.

After the conflict erupted, markets began to reduce expectations for rate cuts, despite easing policies being a key driver of optimism in the stock market this year. The Fed is expected to keep interest rates unchanged at its Wednesday policy statement for the second consecutive meeting.

Last year, the Fed cut rates to support a weak labor market but paused its easing cycle in January, citing diminished risks to employment and inflation. Investors generally expect further rate cuts later this year, which is seen as positive for stocks and other risk assets. However, concerns about inflation triggered by rising energy prices have recently tempered these expectations.

Nvidia GTC Conference Also Draws Attention

Meanwhile, Nvidia’s annual developer conference may rekindle interest in AI trading, which earlier this year intensified volatility in tech stocks.

Held in a hockey arena with over 18,000 seats, Nvidia CEO Jensen Huang is expected to outline the company’s plans to address the rapidly evolving AI landscape.

Nvidia is expected to introduce a next-generation AI chip called Feynman. Huang may also discuss developments in data centers, Nvidia’s CUDA programming platform, digital assistants called AI agents, and physical AI applications like robotics.

Another area of focus could be Groq, a chip startup for which Nvidia licensed its technology in December for $17 billion. Groq specializes in fast, low-cost inference computing, where AI models generate answers or predictions in real-time using previously learned information.

This week will also see earnings reports from several companies, including Micron Technology, Alibaba, and Lululemon.

Analysts’ Views on the U.S. Stock Market

JPMorgan: “Our view is that this upgrade won’t last long due to a series of considerations. After an initial de-risking, it’s advisable to add to positions during weakness. The fundamental backdrop at the onset of the conflict is favorable for stocks, with strong activity and earnings momentum. We see no major changes. Inflation forecasts are declining, and wage growth and service inflation are also easing, contrasting with 2022. These are typically key factors in any inflation spiral.”

Evercore ISI: “Geopolitical risks are at their highest since 9/11, with violence escalating back to the U.S. In the face of uncertainty and $4 gasoline, the ‘tail risk’ of consumer stagflation remains. However, consumer resilience has been a constant in past shocks. On credit, the positive reaction to Oracle’s earnings is a ‘green shoot’ of AI disruption fears. As oil peaks, whether at $119.48 per barrel on March 8 (the baseline) or at the still-high hedge levels—unwinding of short positions in stocks, credit (pessimistic), and oil (optimistic)—will buffer the market decline and catalyze a new rebound.”

Morgan Stanley: “The threat posed by soaring oil prices to the business/profit cycle remains high. While a further acceleration in crude oil/USD change rates could lead to a modest decline in the near term, we believe this adjustment is closer to the end in terms of timing and price.”

RBC Capital Markets: “The S&P 500 has fallen 4.96% from its January peak, approaching our true correction zone (5-10%), but still near the bottom of the brief soft patch seen in October/November last year (down 5.1%). Several issues continued to trouble the U.S. stock market last week, including how long the Iran conflict might last, how high oil prices could go, and the state of private credit. Over the week, the prospect of a prolonged conflict seems more realistic, although a group of investors we met on Thursday still believes the conflict will last no more than 4-6 weeks.”

Raymond James: “The credit markets follow oil prices, which is why credit spreads have only risen slightly and remain far from levels seen during the liberation day, yen carry trades unwinding, banking liquidity crises, or the much narrower Russia/Ukraine situation, or even the risk of a significant U.S. recession. Stocks may get clues from the credit market. Ultimately, until the Strait of Hormuz returns to normal, oil prices will drive credit and stock markets.”

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