Wall Street’s main indexes were subdued on Friday as investors weighed largely in-line inflation data against persistent geopolitical risks stemming from the Middle East conflict.

Major indexes edged higher in early trading, with the S&P 500 up around 0.28%, the Nasdaq 100 gaining 0.43%, and the Dow Jones Industrial Average was down 40 points or 0.57%.

The cautious tone comes after a strong week for equities, driven by optimism around a fragile ceasefire between the United States and Iran.

Inflation data keeps Fed outlook in focus

A report from the Labor Department showed that the Consumer Price Index rose 3.3% in March, matching economists’ expectations.

Core CPI, which excludes food and energy, came in slightly softer at 2.6%, compared with forecasts of 2.7%.

Despite the modest cooling in core inflation, analysts noted that underlying price pressures remain a concern, particularly given the impact of rising energy costs linked to the conflict.

Traders have adjusted their expectations accordingly. Data compiled by LSEG showed that markets are now betting the US Federal Reserve will hold interest rates steady this year, compared with expectations for two rate cuts prior to the escalation in tensions.

San Francisco Fed President Mary Daly also highlighted the inflationary impact of the conflict, telling Reuters that the oil shock from the Iran war would delay progress toward the central bank’s 2% inflation target.

Ceasefire hopes support equities, but risks linger

Equities have been buoyed this week by the announcement of a two-week truce between the US and Iran, putting the S&P 500 on track for its strongest weekly performance since November.

The Dow is also set for its best weekly gain since June, while the Nasdaq is on pace for a more than 4% advance.

Markets found additional support after Israeli Prime Minister Benjamin Netanyahu signaled openness to direct negotiations with Lebanon, helping ease some geopolitical concerns.

However, the ceasefire remains fragile. Tehran and Washington have accused each other of violations, while Iran’s parliamentary speaker, Mohammad Bagher Ghalibaf, said Israel’s continued strikes on Lebanon breach the agreement.

Shipping activity through the Strait of Hormuz, a critical artery for global oil flows, remains severely constrained, keeping markets sensitive to further developments.

Oil volatility and stock movers in focus

Oil prices were little changed in early trading, with West Texas Intermediate crude holding above $97 per barrel and Brent crude above $95, as uncertainty around the Strait of Hormuz continued to weigh on sentiment.

The disruption has already led to a sharp increase in energy costs, with CPI data showing a 10.9% jump in energy prices during the month.

Market participants are also monitoring corporate developments. US-listed shares of Taiwan Semiconductor Manufacturing rose 2.4% in trading after the company beat first-quarter revenue forecasts.

CoreWeave shares gained about 4.77% after announcing a multi-year agreement with artificial intelligence startup Anthropic and pricing a convertible bond offering at a premium.

Looking ahead, investors are awaiting the University of Michigan’s preliminary consumer sentiment reading for April, which could offer further insight into how households are responding to inflation and geopolitical uncertainty.

With inflation, central bank policy, and geopolitical risks all in focus, markets appear poised for continued volatility as investors navigate an increasingly complex macroeconomic environment.

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