Oil Shock Keeps Stocks on Back Foot Ahead of CPI

U.S. stocks finished lower for a second straight session as investors avoided adding risk before Wednesday’s CPI report and continued to monitor the unresolved Strait of Hormuz disruption. Oil moved higher as Iran reiterated plans to keep the waterway shut until its demands are met, keeping inflation risks in focus even as Treasuries rallied modestly. The setup leaves markets caught between hopes for softer inflation and concern that higher energy prices could complicate the Federal Reserve’s path.

Key Headlines & Market Movers:

• Oil Rebounds on Hormuz Uncertainty: WTI crude rose to roughly $83 a barrel as investors weighed conflicting signals around a potential deal to restore energy flows through the Strait of Hormuz. Pakistan suggested the U.S. and Iran were close to an arrangement, while Iranian officials pointed to possible progress involving Oman. Still, the lack of clarity on whether any deal would fully and immediately reopen the strait kept a geopolitical risk premium in crude.
• CPI Takes Center Stage for Fed Expectations: Wednesday’s inflation report is the key macro event, with investors looking for evidence that consumer price pressures are continuing to moderate. A softer reading would support the view that the Fed can hold rates steady, especially after last week’s weak jobs report. A hotter print, particularly if energy pressure appears to be feeding into broader inflation, could revive concerns about a more hawkish Fed stance.

AI and Earnings Drive Stock-Specific Moves: Corporate news remained active, especially around AI infrastructure and technology. Riot Platforms rose after reports of a roughly $9 billion cloud deal with Anthropic, while Nvidia was little changed after announcing financing-related agreements tied to AI data center buildout. Earnings reactions were mixed, with On Holding selling off sharply after disappointing sales, while Sea Limited rallied on stronger results.

S&P 500 Sector Performance

Looking Ahead

The market’s near-term direction likely hinges on two catalysts: the CPI report and any concrete progress toward reopening the Strait of Hormuz. A benign inflation print combined with easing oil prices would likely support risk sentiment and lower yields, while persistent energy disruptions could keep investors cautious even if underlying inflation improves. For portfolios, the key issue is whether the oil shock remains a temporary geopolitical premium or begins to reshape the inflation and Fed-policy narrative.

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