Sunday, May 10

Escalating U.S.-Iran military tensions in the Strait of Hormuz drove oil prices to $105 per barrel for WTI, up 3% on Thursday, overshadowing strong U.S. corporate earnings and capping equity gains as traders repriced energy disruption risks against resilient fundamentals. The S&P 500 closed lower after six straight weekly advances, with energy and materials sectors leading the pullback despite 85% of index companies beating EPS estimates by 19% on average through May 7; technology held firm on AI-driven gains exceeding 50% year-over-year. Nasdaq similarly retreated amid the risk-off turn, while broad sector participation had supported prior records.

Context sharpened around U.S. economic strength bucking consensus softening fears: initial jobless claims hit 200,000 versus 205,000 expected, continuing claims fell to 1.77 million, and April nonfarm payrolls added 115,000 jobs topping 62,000 forecasts, with March revised to 185,000 for the strongest two-month gain since 2024. Bond yields climbed to 4.38% on the 10-year Treasury as oil's surge revived inflation worries, countering prior dips from peace hopes; the USD strengthened modestly against majors. Internationally, Japan's Nikkei hit records overnight, but Europe pressured by ECB hawkishness hinting at a June rate hike absent sustained inflation relief.

Commodities reflected the pivot, with oil's rebound erasing a 7% drop to $95 on fleeting U.S.-Iran deal optimism, while gold drew safe-haven bids amid FX volatility. Crypto stayed sidelined without fresh catalysts. Positioning unwinds in energy exposed oil-sensitive longs built on earnings momentum, challenging the narrative of U.S. growth immunity to geopolitics.

Monday's ISM manufacturing PMI matters as it tests if factory orders' 1.5% March surge from AI electronics persists amid oil shocks; sub-50 would validate slowdown bets and pressure Fed cut odds.