Financial markets endured another turbulent week ending as investors tried to reconcile cooler inflation data with an energy shock severe enough to revive stagflation fears. Despite the noise, the broader market has held up better than the headlines suggest. The S&P 500 (SPX) is still trading within roughly 5% of its all-time high, a sign that while volatility is elevated and confidence has clearly been shaken, investors and traders still appear willing to step in on any favorable macro or geopolitical news in what remains a volatile but resilient tape.

The key economic release this week was the February CPI report, and it was cooler than many feared. The consumer price index rose 0.3% in February and 2.4% from a year earlier, matching expectations and holding at the lowest annual rate since May 2025. Core CPI rose 0.2% on the month and 2.5% year over year, with shelter showing signs of cooling as well. That should have been an unambiguous relief signal, but the market’s reaction was muted because inflation data quickly took a back seat to events in the oil market.

Energy dominated the week. Crude first exploded higher as the Iran conflict escalated, with futures briefly spiking toward $120 a barrel early in the week. Prices then violently reversed, sliding to roughly $75 by midweek, only to rebound again toward the psychological $100 level by Thursday as supply concerns in the Middle East intensified. The scale of those swings made it difficult for investors to treat this as a routine commodity move. Instead, the oil action reopened the possibility that geopolitical supply shocks could push inflation back up even as growth slows, which is why stagflation worries returned so quickly.

That macro mix was brutal for equities. All major S&P 500 sectors traded the week lower except energy, which naturally benefited from the oil spike. Financials were the worst-performing sector, down more than 4%, as investors refocused on private-credit fragility and the risk of an asset-liability mismatch if funding costs stay high while collateral values soften. Consumer discretionary was the second-worst performer, reflecting growing concern that higher fuel costs and broader inflation pressure will erode household purchasing power and weigh on spending across travel, retail, and leisure. The broad tone of the market was defensive even though the major indexes never fully broke to the downside.

Cross-asset signals confirmed that shift. The U.S. dollar rose about 1.5% as investors sought liquidity and safety. At the same time, long-duration Treasurys sold off, with long-end yields rising as the market priced in the inflationary consequences of a renewed oil shock. Notably, gold fell despite the geopolitical backdrop, a sign that profit-taking and a preference for cash, money markets, and shorter-duration instruments dominated classic safe-haven buying. In other words, this was less a clean flight to hard assets and more a move toward liquidity preference.

Volatility remained elevated throughout. The VIX spiked to 35 on Monday and, even after easing, stayed in the mid-20s into week’s end. That is high enough to signal real stress, but not yet the kind of panic associated with forced liquidation across the board. The market has clearly become more fragile, but it has not become indiscriminately disorderly. That distinction matters, especially with the S&P still relatively close to its highs.

Today’s data will matter a great deal. Investors got the PCE Price Index, the Fed’s preferred inflation gauge, alongside durable goods orders and JOLTS job openings later this morning. Core PCE prices came in line, but the year-over-year price index dipped slightly. A softer PCE could help offset some of the inflation fear coming from oil and give equities room to stabilize. It also potentially gives the Fed more flexibility on rates. Durable goods and JOLTS will also matter because they can help answer the central question now confronting markets: is the economy merely bending under higher energy costs, or is it at risk of something worse?

For now, the message is uneasy but not broken. Inflation data improved, oil exploded, yields rose, and most sectors fell, yet the broad market is still hovering near historic highs. That combination suggests investors remain nervous but not fully defeated. In a market like this, bad news can still hit hard, but good news can travel fast.

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