The ongoing conflict involving Iran is expected to remain the main focus for investors in the coming days, as markets assess the potential consequences for energy prices and global assets. A preliminary reading of U.S. business activity could offer early insight into how the conflict is affecting the broader economy, while cruise operator Carnival Corp. (NYSE:CCL) may provide clues about how Corporate America is coping with the Middle East crisis.
1. Iran conflict remains in focus
Events in the Middle East are likely to dominate market sentiment this week, with the joint U.S.-Israeli military campaign against Iran now entering its fourth week.
Investors are increasingly concerned that a prolonged conflict could drive energy prices higher, potentially reigniting inflation pressures worldwide and prompting central banks to adopt more hawkish policy stances.
At the center of the issue is the Strait of Hormuz, a narrow passage south of Iran through which roughly 20% of global oil supplies pass. The waterway has effectively remained closed to tanker traffic for weeks, as shipping companies fear that Iran could attack vessels attempting to pass through the strategic chokepoint.
U.S. President Donald Trump has demanded that Iran reopen the strait by Monday night or face strikes targeting key power infrastructure. Tehran has rejected the ultimatum, warning that the strait would remain “completely closed” if its own energy facilities were attacked.
Trump’s statements on the conflict have appeared inconsistent, adding to uncertainty about Washington’s strategy and the possible duration of the military campaign. The president has warned that the U.S. could “obliterate” Iranian power facilities, while also suggesting that the operation could soon be “winding down.”
“We note uncertainty around both the point at which the U.S. would stop operations against Iran and how quickly would Iran let tankers through,” analysts at UBS said in a note.
2. Oil surge in the spotlight
Even as governments push for the reopening of shipping routes through the Strait of Hormuz, concerns about a sustained surge in energy prices have intensified.
International Energy Agency Executive Director Fatih Birol warned Monday that the world could be facing an oil crisis so “severe” that it rivals the shocks experienced about five decades ago.
The ripple effects have already been visible across financial markets. Government bond yields — particularly on U.S. Treasuries — have risen as investors factor in the possibility that higher oil prices could fuel inflation and keep interest rates elevated for longer.
Equity markets in Asia and Europe started the week lower, while U.S. stock futures also edged down. One analyst quoted by Reuters said equities could face additional pressure if the benchmark 10-year Treasury yield rises to 4.5% from its current level of around 4.44%.
Gold prices have also declined, partly due to a stronger U.S. dollar. The precious metal has erased much of its gains for the year after earlier rallying to record highs.
Analysts at ING said oil prices remain the main driver of overall market sentiment. May Brent crude futures, the global benchmark, were last up 1.2% at $113.55 per barrel. Before the conflict began, Brent had been trading near $70 per barrel.
3. U.S. flash PMIs on the economic calendar
The economic calendar for the week ahead is relatively light, though one report is expected to attract attention.
Investors will be watching the release of the U.S. flash purchasing managers’ index for March, scheduled for Tuesday.
The early reading of business activity could provide some of the first indications of how the conflict involving Iran is affecting economic conditions, analysts at Vital Knowledge noted.
Last week, Federal Reserve Chair Jerome Powell said it was “too soon to know the scope and duration of the potential effects on the economy” resulting from the conflict, though he acknowledged that higher energy prices are likely to push inflation higher in the near term.
4. Carnival results in focus
Carnival Corp. (NYSE:CCL) will draw attention on Friday when the cruise operator reports its latest quarterly earnings and may offer insight into how rising fuel costs tied to the Iran conflict are affecting the industry.
Analysts say the surge in oil prices is likely to raise fuel expenses for cruise companies such as Carnival.
Because cruise operators rely heavily on heavy fuel oil and marine gas oil, many typically hedge their exposure through financial contracts that lock in prices and reduce the impact of sudden swings in oil markets.
However, analysts note that Carnival is the only major U.S. cruise line that does not currently hedge its fuel costs, potentially leaving its earnings more vulnerable to the recent spike in energy prices.
Carnival shares have fallen more than 21% since the start of the year.
5. GameStop earnings ahead
Elsewhere, GameStop is scheduled to report fourth-quarter results after markets close on Tuesday.
The Texas-based retailer has been attempting to shift its business toward digital operations as demand for physical video games continues to decline.
The company previously reported disappointing revenue for the third quarter, highlighting the challenges it faces.
Although GameStop has been working to expand its e-commerce platform with more digital downloads and merchandise offerings, it continues to face intense competition — particularly from e-commerce giant Amazon — which has eroded its market share.
GameStop, which gained global attention during the meme-stock surge of 2021, has also experienced significant volatility in its share price since that period.