US Stocks Reverse Gains as Oil Prices Surge, Raising Inflation and Rate Concerns

US equities reversed earlier gains Friday as crude oil prices surged to $87.32 per barrel, marking a 4.1% weekly rise and the highest level since late 2023. The rebound in CL=F was fueled by renewed Middle East tensions and supply concerns, prompting investors to reassess inflation risks. As a result, the S&P 500 dropped 0.7%, while the Nasdaq Composite fell 0.8%, reversing a morning rally that had seen both indices up nearly 0.5% at midday. The energy sector suffered the most, with ExxonMobil and Chevron posting losses of 2.3% and 1.9% respectively, despite their exposure to higher oil prices. In contrast, defense stocks such as Lockheed Martin and Raytheon Technologies saw modest gains, with Lockheed rising 1.2% on renewed geopolitical uncertainty. The broader market’s reaction underscored growing anxiety about a potential policy tightening cycle, even as economic data remains mixed. Volatility surged as the CBOE VIX index jumped 12% to close at 17.4, signaling increased investor anxiety. This spike coincided with a 3.2% rise in 10-year Treasury yields to 4.18%, reflecting market expectations of delayed Fed rate cuts. The shift in sentiment pressured technology stocks, with Apple (AAPL) shedding 1.5% despite strong quarterly earnings guidance released earlier in the week. Market participants now await next week’s inflation data and the Federal Reserve’s latest policy statement for further clues on interest rate trajectory. The oil-driven volatility is expected to persist if geopolitical tensions escalate, particularly in the Red Sea and Persian Gulf regions, where shipping disruptions have increased.