Oil Hit $100. The Fed Trade Changed.

GOOD MORNING, The Iran war has officially moved from geopolitics into monetary policy. Brent closed above $100 for the first time since 2022, the S&P 500 posted a third straight weekly decline and markets cut their expectations for Fed easing almost in half. The next test comes this week: Powell has to explain how much of the oil shock the Fed can look through. Meanwhile, Nvidia's annual developer conference arrives just as investors are questioning whether the AI trade can keep outrunning higher rates and growing execution risk.

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MARKETS | TLDR

• Wall Street ends another week lower: The Dow fell 0.26%, the S&P 500 lost 0.61% and the Nasdaq dropped 0.93% Friday, leaving the S&P about 5% below its late-January record after a third straight weekly decline.
• Brent closes above $100: Brent settled at $103.14 and WTI at $98.71 as the Iran conflict spread across the region and Hormuz disruption tightened global supply.
• Fed-cut expectations get slashed: Futures priced slightly less than one 25-basis-point cut by December, down from two cuts before the war began in late February.

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RATES

Oil Hit $100. The Fed Trade Changed.

The biggest market shift of the past two weeks is no longer the oil rally itself. It is what oil is doing to the expected path of interest rates. Brent ended Friday at $103.14 a barrel after briefly approaching $120 earlier in the week, while the S&P 500 closed about 5% below its January record and posted a third consecutive weekly decline.

Before the war, investors expected roughly two quarter-point Fed cuts this year. By Friday, futures markets were pricing slightly less than one. The logic is straightforward: a prolonged energy shock raises headline inflation and can feed through to transportation, goods and household expectations, reducing the Fed's room to ease even if growth softens.

That leaves Powell with a difficult communication problem at this week's meeting. February payrolls were weak enough to justify an easing bias, but oil is moving in the opposite direction. The Fed is widely expected to hold rates steady. What matters more is whether updated projections and Powell's language tell investors that the central bank sees the energy shock as temporary — or as something that could keep policy restrictive for much longer.

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AI TRADE

Nvidia Has to Prove AI Can Outrun $100 Oil

Nvidia's annual developer conference arrives this week at an awkward moment for the AI trade. Technology stocks have been among the hardest hit as higher oil and reduced rate-cut expectations push discount rates upward, while investors are also becoming more sensitive to delays and execution issues across major AI platforms.

The conference matters because Nvidia remains the clearest read on whether AI infrastructure demand is still expanding fast enough to offset that macro pressure. New product roadmaps, networking announcements and customer commitments can reinforce the idea that the capex cycle remains intact even while the valuation backdrop becomes less supportive.

The risk is that strong demand is no longer sufficient on its own. Meta fell 3.8% Friday after reports that its "Avocado" AI model had been delayed, while Adobe dropped 7.6% after its CEO transition revived disruption concerns. The market is starting to demand evidence that AI spending produces products, revenue and margins on schedule. Nvidia can strengthen the infrastructure thesis this week, but it cannot remove the higher-rate problem surrounding it.

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HEADLINES

• Q4 GDP gets cut sharply: The government's latest estimate slashed fourth-quarter growth roughly in half, reinforcing the risk that the Fed is confronting weaker growth at the same time as oil pushes inflation higher.
• PCE inflation stays elevated: The Fed's preferred inflation gauge showed little improvement, making the energy shock harder for policymakers to dismiss.
• Meta delays its “Avocado” model: Shares fell 3.8% after reports that the next model release had slipped to at least May, adding execution risk to a company already spending heavily on AI.
• Adobe's CEO transition reopens the disruption debate: Adobe dropped 7.6% after longtime CEO Shantanu Narayen said he would leave once a successor is found, putting leadership uncertainty on top of AI competition.
• Russia sanctions get temporary relief: The U.S. temporarily eased sanctions on Russian oil in an effort to offset supply disruption, showing how far the Iran shock is already reshaping energy policy.

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UPCOMING

• The Fed meeting begins March 17: Rates are expected to remain unchanged, but updated projections and Powell's comments will show how much the oil shock has changed the easing path.
• Nvidia GTC runs this week: Product announcements and customer commentary will test whether AI infrastructure demand is still strong enough to counter a less supportive macro backdrop.
• Industrial production arrives March 17: Factory output will show whether business investment remains resilient as higher energy costs and tighter financial conditions hit the economy.
• Retail sales arrive March 18: Consumer spending will provide the first major read on whether higher gasoline prices are beginning to alter household behavior.

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DEEP INSIGTHS

Wall Street Week Ahead: Investors Await the Fed's Iran-War Read

Reuters' week-ahead analysis captures the regime change clearly: the market entered the year expecting rate cuts, but the energy shock is forcing investors to ask whether the Fed can ease at all. The most important issue is no longer the next oil headline — it is how persistent oil becomes inside the central bank's reaction function.

Wall Street Ends Lower as the Iran War Fuels Inflation Worries

The Friday market recap is useful because it shows the two-sided nature of the shock in one place: softer GDP and capital-goods data point to weaker growth, while Brent above $100 and elevated PCE inflation argue for tighter policy. That is the exact combination equity investors dislike most.