Despite the rise in the price of crude oil to $111.54, US stocks ended last week higher for the first time since February 20. This rebound has been fueled by a slight decline in interest rates and a domestic economy that remains resilient despite heightened geopolitical risks amid the ongoing conflict in the Middle East.
This stability has been supported by significant investments in artificial intelligence (AI), strong consumer spending by high-income households and tailwinds from the Federal Reserve in late 2024 and 2025, as well as the fiscal stimulus of the One Big Beautiful Bill Act. Notably, the Hutchins Center at Brookings estimates that fiscal policy will add 2.1% to gross domestic product growth () in the first quarter of 2026.
However, the economy remains in a delicate balance. The recent surge in oil prices caused by the conflict threatens higher inflation and has pushed interest rates almost to where they were before the Fed began cutting rates in September 2025. The two-year Treasury rate rose from a pre-conflict low of 3.37 percent in late February to a high of 3.98 percent on March 26 before settling at 3.79 percent for the week last. Likewise, the rate rose from 3.94 percent to 4.43 percent last week before ending at 4.34 percent. Higher rates threaten to undo previous monetary stimulus and continue to put downward pressure on stocks, which could ultimately dampen consumer spending.
Although last week’s employment data was generally positive, especially Friday’s, it still reflects the underlying weakness in employment in March and does not yet signal a break from the slowing trend of the past 15 months. Although employers added 178,000 jobs last month (nearly triple the 65,000 expected), the data also reflects a cautious environment. The figure fell to 4.3 percent from 4.4 percent, a drop attributed to the departure of 396,000 people from the labor force rather than a massive increase in hiring. Average hourly wages rose just 0.2 percent for the month and 3.5 percent annually, the latter marking the slowest annual pace in nearly five years.
Inflationary pressures also remain stubborn. The Institute for Supply Management (ISM) hit…
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