US equities ended the week in the red Friday as the war in Iran heads into its third week and attention increasingly turns toward the impact of runaway oil prices on inflation.

The S&P 500 (^GSPC) closed out Friday down 0.6% for a loss of 1.6% on the week. The Dow Jones Industrial Average (^DJI) lost 0.3%, or roughly 120 points, on Friday to close the week down 2%. The tech-heavy Nasdaq Composite (^IXIC) fell 0.9% on Friday and ended the week in the red by 1.3%.

In the week ahead, all eyes will be on the Fed meeting โ€” and what Chair Jerome Powell does or doesn't say about the impact of the war in Iran on inflation in his second-to-last meeting as chair.

In a relatively quiet week on the economic calendar, investors will get more information on the state of the labor market from ADP's weekly employment change numbers on Tuesday and Thursday's jobless claims data, alongside a slate of manufacturing data on Monday.

On the earnings calendar, Micron's Wednesday results will take the spotlight, with reports from Dollar Tree (DLTR), Oklo (OKLO), Macy's (M), and Darden Restaurants (DRI) also on the schedule.

Another big event to watch: Nvidia's (NVDA) biggest event of the year, GTC 2026, kicking off with a keynote from CEO Jensen Huang on Monday. (Preview here.)

Three weeks in, the war in Iran is showing no signs of slowing down, and the Strait of Hormuz, the world's most important shipping chokepoint for the global energy industry, remains at a standstill.

Last Sunday, oil prices jumped over the critical $100 per barrel mark for the first time since the energy crisis kicked off by the 2022 Russian invasion of Ukraine. Prices quickly cooled off into the $80s, but drone strikes on critical infrastructure, force majeure declarations from major refineries and export terminals, and a growing list of production cuts throughout the Gulf states have sent prices right back up.

It all comes down to the Strait, where roughly 14 million barrels of crude oil traverse the 21-mile-wide waterway on a typical day. Iran's Revolutionary Guard Corps has said it won't allow "a liter of oil" to cross.

Without an open Strait, strategists say prices will only continue to rise and remain elevated for longer. If the waterway remains blocked for 60 days, Goldman Sachs strategists say fourth quarter oil prices could average $93 per barrel on Brent (BZ=F) and $89 per barrel on US West Texas Intermediate (CL=F). And the fourth quarter is far away.

Read more: How oil price shocks ripple through your wallet, from gas to groceries

The past week's dual inflation readings both told the same story: Inflation is remaining stickily above the Fed's 2% target rate for rising prices.

"Looking ahead, risks to the inflation outlook remain skewed to the upside," John Lloyd, global head of multi-sector credit at Janus Henderson Investors, said. Add in rising oil prices, and that "raises the possibility that inflation could remain elevated for longer."

Luckily for the Fed, though inflation has remained elevated, price pressure isn't rising sharply. All readings on headline and core CPI and PCE were either in line with the previous month or only slightly higher.

That said, the periods covered โ€” February for CPI and January for PCE โ€” both precede the outbreak of war in the Middle East and, therefore, the roughly 50% run-up in oil prices.

The concern among market watchers is that the US will enter a period of stagflation. Oil is up 50% over the past month, and inflation is sticking high, but the US lost 92,000 jobs in February, and data out Friday showed that fourth quarter GDP cooled more than expected.

On the other hand, stagflation concerns may be premature as we await a better picture of the war's impact on the domestic economy, Chris Zaccarelli, chief investment officer of Northlight Asset Management, pointed out.

Those concerns are likely to put the Fed in a bind at its upcoming meeting on Wednesday, where the governors of the Fed's rate-setting committee will be forced to weigh their dual mandate against an energy crisis that could raise prices and hurt growth.

"Inflation will be impacted by the war and unemployment will be impacted by the disruptions in the labor market," Jeffrey Roach, chief economist for LPL Financial, wrote in a note. Therefore, "We expect the Fed to highlight the uncertainty on both sides of the mandate."

The question for the Fed governors will be whether they think energy costs, which have an immediate impact on headline inflation, will bleed into core inflation in the coming months. If energy costs trickle down into core, future readings on core PCE could push higher than anticipated.

Joe Brusuelas, chief economist for RSM, said he expects the Fed to temporarily look through volatile energy costs โ€” noting that the picture could change.

"Should those inflation expectations start moving higher, the central bank will be reluctant to make the same policy error it made during the pandemic era, which featured an energy shock following the Russian invasion of Ukraine," Brusuelas wrote in a note.

Traders are at near consensus that the Fed will leave rates unchanged at its upcoming meeting, with 99.1% of bets on no change. Odds of at least one rate cut by the Fed's December meeting currently sit at roughly 40%.

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments

Economic data: Empire manufacturing, March (3.9 expected, 7.1 previously); Industrial production, month-on-month, February (+0.1% expected, +0.7% previously); Manufacturing (SIC) Production, February (0.2% expected, 0.6% previously); Capacity Utilization, February (76.2% expected, 76.2% previously); NAHB housing market index, March (37 expected, 36 previously)

Earnings calendar: Dollar Tree (DLTR), KE Holdings (BEKE), Forgent Power Solutions (FPS), Semtech Corporation (SMTC), VNET Group (VNET)

Economic data: ADP weekly employment change, week ended Feb. 28 (15,500 previously); New York Fed services business activity, March (-25.7 previously); Pending home sales, month-on-month, February (-1% expected, -0.8% previously)

Earnings calendar: Elbit Systems (ESLT), Tencent Music Entertainment Group (TME), lululemon athletica (LULU), DocuSign (DOCU), Oklo (OKLO), New Gold, (NGD) GDS Holdings (GDS)

Economic data: FOMC rate decision; PPI final demand, month-on-month, February (+0.3% expected, +0.5% previously); PPI ex food and energy, month-on-month, February (+0.3% expected, +0.8% previously); PPI final demand, year-on-year, February (+2.9% previously); PPI ex food and energy, year-on-year, February (+3.6% previously); Factory orders, January (-0.7% previously); Durable goods orders, January final reading (-1.4% previously); MBA mortgage applications, week ended March 13, (+3.2% previously)

Earnings calendar: Micron Technology (MU), Prudential (PRU), Jabil Inc. (JBL), Williams-Sonoma (WSM), General Mills (GIS), H World Group Limited (HTHT), Five Below (FIVE), SailPoint (SAIL), EquipmentShare.com Inc. (EQPT), Macy's (M), Weibo Corporation (WB)

Economic data: Initial jobless claims, week ended March 14 (213,000 previously); Continuing claims, week ended March 7 (1.85 million previously); Philadelphia Fed business outlook, March (16.3 previously); New home sales, month-on-month, January (-2.7% expected, -1.7% previously); Wholesale inventories, month-on-month, January final reading (+0.2% expected); Building permits, month-on-month, January final reading (-5.4% previously)

Earnings calendar: Alibaba Group (BABA), PDD Holdings (PDD), Accenture (ACN), FedEx (FDX), Carnival Corporation (CCL), Darden Restaurants (DRI), Planet Labs (PL)

Friday

Economic data: No notable economic data.

Earnings calendar: XPeng (XPEV)

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