Dear readers,
On Thursday we wrote that the S&P 500’s composure rested on a foundation of macroeconomic data that was already stale—and that the equity market’s patience with a closed Strait of Hormuz had an expiration date. Two days later, patience has expired.
U.S. equities closed out their third consecutive week of losses on Friday, with the S&P 500 shedding 0.6% and the Nasdaq dropping 1.3%. But the weekly scoreboard barely captures the structural damage accumulating beneath the surface. The Strait of Hormuz, which we have been tracking since late February as it transformed from shipping lane to combat zone to declared blockade, has now effectively shut down. Goldman Sachs vessel tracking data shows daily oil flows through the strait collapsing from 19.5 million barrels to roughly 500,000—a 97% reduction that has no modern precedent.
Here is where things stand heading into the most consequential Fed meeting in years.
The Strait: From Tourniquet to Cardiac Arrest
Thursday we noted that the IEA’s 400-million-barrel strategic reserve release was a tourniquet, not a cure. The patient’s condition has since deteriorated. With the strait now functionally sealed, the IEA estimates a sustained daily disruption of 8 million barrels—roughly 20% of global oil and LNG shipments removed from the market in a matter of weeks.
Prices have pulled back from the panic-induced intraday spike to $111 earlier this month, but the new floor is punishing. WTI crude settled Friday at $98.71. Brent closed at $103.14. These are not spike prices. They are the new baseline.
The physical consequences are radiating outward. Drone strikes near Dubai’s main airport have thrown Gulf aviation into disarray. Halfway around the world, Cuba—already fragile—has seen unprecedented blackouts worsened by the oil squeeze spark rare anti-government riots. The crisis that began as a regional military conflict is now a global supply chain event.
Stagflation: No Longer a Thought Experiment
On Thursday we warned that no economy is immune to a sustained supply shock of this magnitude, and that the question was not whether the oil crisis would reach corporate earnings and consumer spending, but when. The answer arrived in Friday’s data.
Fourth-quarter 2025 GDP was revised down sharply to 0.7%—half the previously reported 1.4%. The February jobs report was worse: the U.S. economy unexpectedly shed 92,000 positions, pushing unemployment to 4.4%. Growth is stalling.
Yet inflation is accelerating in the opposite direction. Core PCE for January printed at 3.1% year-over-year—the Fed’s preferred gauge moving decisively the wrong way. The bond market’s verdict was immediate: the 10-year Treasury yield climbed to 4.28%, and futures traders have priced out any rate cut next week. The market now sees the first easing arriving no sooner than January 2027.
That is the stagflation trap in its purest form: an economy too weak to withstand tight policy, and an inflation picture too hot to justify loosening it. Jerome Powell walks into next week’s FOMC meeting with no good options and a labor market that is cracking in real time.
Big Tech’s AI Divergence Widens
While the macro picture darkens, the artificial intelligence trade is splitting cleanly into winners and losers—and the dividing line is who writes the checks versus who cashes them.
On the expenditure side, the bills are arriving. According to insider reports, Meta is preparing a significant round of layoffs, driven primarily by the need to free up capital for its ballooning AI infrastructure costs. The company that bet its identity on the metaverse is now discovering that the AI pivot carries its own crushing capital demands.
The hardware providers, meanwhile, are thriving on the other side of that equation. Oracle surged 9.18% on Wednesday to $163.12 after reporting a fiscal Q3 beat, powered by an 84% jump in cloud infrastructure revenue to $4.9 billion. The company has secured major contracts supplying cloud capacity to AI firms including OpenAI. Friday’s broader selloff pulled Oracle back to $156.55, but the underlying demand signal was unmistakable. Memory chipmakers Micron and SanDisk are seeing similar dynamics—analysts note that AI-driven demand has effectively booked out high-bandwidth memory supplies through 2026, creating scarcity-driven margin expansion that the broader market downturn has failed to dent.
Bitcoin’s Stress Test Gets Harder
On Thursday we highlighted Bitcoin’s quiet outperformance since the conflict escalated—a 7% gain while the S&P slipped and gold surprisingly declined. That resilience is being tested more severely now.
Bitcoin hovered near $70,874 heading into the weekend, having pulled back roughly 3.7% after the grim GDP revision, cooling from the $74,000 level it touched earlier this month when the oil shock first intensified. The retreat is notable but modest given the macro carnage surrounding it.
More telling than the spot price is the infrastructure story underneath. The stablecoin market cap has reached a new all-time high of $320 billion—a measure of liquidity staged and waiting for deployment. On the institutional front, rumors are circulating that Coinbase is exploring a strategic investment in offshore exchange giant Bybit, a move that would dramatically expand its global derivatives reach. Whether Bitcoin ultimately earns its safe-haven credentials in this crisis remains an open verdict, but capital continues to flow into the ecosystem even as traditional markets contract.
The Week Ahead: Powell’s Impossible Press Conference
Next week’s FOMC meeting is the main event, though not for the reason it usually is. With the probability of a rate cut sitting below 1%, the rate decision itself is settled. The real theater will be Jerome Powell’s press conference.
He faces a question that has no clean answer: How does the Federal Reserve communicate its intentions when the economy is simultaneously too weak and too inflationary for any single policy response? A dovish lean risks validating inflation expectations that are already drifting higher. A hawkish lean risks accelerating a labor market deterioration that is no longer hypothetical.
Thursday we wrote that the equity market was pricing yesterday’s economy while the energy complex was pricing next month’s. After this week’s data, those two timelines have converged—and neither picture is reassuring.
I hope you enjoy the rest of your weekend. We will be watching futures closely on Sunday evening.
Best regards,
The StocksToday.com Editorial
