S&P 500 futures are pointing +0.37% higher ahead of Friday’s open, a modest recovery attempt after the index shed 1.52% on Thursday flirts with $100 a barrel pricing. The session’s tentative optimism rests on a complicated foundation: energy prices that are surging toward levels not seen since 2022, geopolitical disruption in the Strait of Hormuz, and a trade report that delivered a rare piece of good news.
Oil at $100 Is Driving Everything Right Now
WTI crude Is currently just shy of $94 a barrel, with brent at $99, just a hair away from $100. The move was driven by the effective closure of the Strait of Hormuz. The move has been swift and severe, with energy ETFs like USO surging nearly 10% in a single session. Energy producers are among the clearest beneficiaries: Devon Energy has drawn analyst upgrades and call options activity, while Dow Inc. shares jumped roughly 9% as investors rotated into names with direct exposure to higher crude prices.
The driver is the U.S.-Israeli military campaign against Iran, which has effectively closed the Strait of Hormuz since late February. Defense Secretary Pete Hegseth confirmed the strait remains open for transit only in principle, with Iranian military actions blocking shipping flow. The International Energy Agency called this the biggest disruption to global energy markets ever. That’s the backdrop for why oil is trading where it is and why energy stocks are outperforming.
Why the Broader Market Is Struggling to Follow
Despite energy strength, the rest of the market has been under real pressure. The S&P 500 has lost 2.33% year-to-date year-to-date, and small caps have been hit even harder — the Russell 2000 is down 7.04% in the same period over the past month — as rising oil costs and rate fears disproportionately squeeze economically sensitive companies. The Dow is down 6.86% over the past month over the past month, with industrial and consumer names struggling to absorb higher input costs.
Tech has been a particular drag. The Nasdaq 100 is off 2.78% year-to-date, weighed down by semiconductor weakness as higher oil prices stoke inflation fears and push Treasury yields up. NVIDIA fell over 1.5% Thursday, and the leveraged semiconductor ETF SOXL dropped more than 10%, underscoring how rate-sensitive growth names are bearing the brunt of the macro pressure.
The 10-year Treasury yield has climbed to 4.21%, up from 4.05% at the start of March, as markets price in the inflationary consequences of triple-digit oil. Higher yields compress valuations for growth stocks, which explains why tech is underperforming even as energy rallies. Airlines face a direct hit from fuel costs: TD Cowen cut its United Airlines price target from $140 to $128, citing persistent fuel inflation.
One Bright Spot: Trade Data
Friday’s pre-market optimism gets some support from January trade data. The U.S. trade deficit narrowed to $54.5 billion in January, a 25% decline from December and well below analyst expectations of $67 billion. Exports rose 5.5%, led by gold shipments overseas. It’s a clean positive data point in an otherwise complicated macro picture, and it may be giving futures a modest lift this morning.
Two Variables That Will Decide Where the Market Goes From Here
The VIX sits at 24.23, firmly in elevated territory and up nearly 40% from a month ago. Consumer sentiment, last measured at 56.4, is already in pessimistic territory, and $100 oil at the pump will pressure that further. The pre-market bounce looks fragile unless energy gains broaden into the rest of the market. If the Strait of Hormuz reopens, oil prices will retreat and Treasury yields will likely follow — that combination would relieve the pressure on tech valuations almost immediately. If it does not, the pre-market bounce has little to stand on.
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