Geopolitical Tensions and Inflation Fears Weigh on Tech Index for Third Straight Week

For the third consecutive week, the Nasdaq 100 closed in negative territory. The decline reflects a fundamental shift in market dynamics, driven not by typical volatility but by escalating Middle East tensions. A blockade of the Strait of Hormuz and surging crude prices have created a new and challenging environment for investors.

Stagflation Concerns Take Center Stage

The immediate catalyst has been the oil market. Brent crude surpassed $100 per barrel for the first time since August 2022, while West Texas Intermediate (WTI) climbed to nearly $96. Weekly gains exceeded 8% and 11%, respectively. This surge is critically linked to the Strait of Hormuz, a chokepoint that previously handled roughly 20% of global oil consumption and where maritime traffic has now nearly halted.

The repercussions are widespread. Rising energy costs are rekindling inflation expectations, pushing the yield on the benchmark 10-year U.S. Treasury note to 4.29%—its highest level since early February. Concurrently, economic optimism is dimming. The University of Michigan’s preliminary March survey revealed a sharp drop in consumer sentiment, with gasoline price expectations hitting a peak not seen since 2022. The market narrative is now dominated by fears of stagflation, a scenario combining persistent inflation with weaker economic growth.

In this climate, a March interest rate cut from the Federal Reserve is considered off the table. Traders are currently pricing in just a single rate reduction, anticipated for December.

Should investors sell immediately? Or is it worth buying NASDAQ 100?

Corporate News Adds to the Pressure

The tech-heavy index faced additional headwinds from corporate developments on Friday. Adobe shares plummeted approximately 8% after the company reported disappointing earnings and CEO Shantanu Narayen announced his intention to step down once a successor is found. This news weighed on the broader sector, with Meta, Palantir, and Oracle shedding between 1.7% and 3.8%. In the Dow Jones Industrial Average, losses in Salesforce (−3.25%), Apple (−2.15%), and Microsoft (−1.57%) contributed to the downward momentum.

Despite the pervasive negative sentiment, the Invesco Nasdaq 100 ETF (QQQM) recorded net inflows of about $275 million over the past five trading sessions. This suggests some institutional investors are viewing the market weakness as a selective buying opportunity.

Key Events on the Horizon: AI and Fed Policy

Attention now turns to two potentially market-moving events in the coming week. On Monday, Nvidia CEO Jensen Huang will kick off the company’s GTC conference (March 18-21) with a keynote address on the “Five Layers of AI.” With Nvidia shares down roughly 5% year-to-date, analysts see the event as a potential catalyst to reaffirm demand for AI infrastructure.

Subsequently, the Federal Open Market Committee (FOMC) will convene on Tuesday and Wednesday. The central bank faces a clear dilemma: a softening labor market would argue for monetary easing, while stubborn inflation pressures counsel against it. The consensus expectation is for the Fed to hold interest rates steady. Technically, the Nasdaq 100 is currently trading below the significant 24,600-point zone, with its February low of 24,218 points representing the next notable level of support.