U.S. stock indices moved lower on Friday, leaving the S&P 500 on track for a weekly decline of more than 1% as of 12:50 PM. Market participants are weighing a confluence of pressures: oil prices firmly above $100 per barrel, 10-year Treasury yields around 4.27%, and a roughly 3.5% fall in gold for the month.
Energy has been the dominant market narrative this week as the conflict involving Iran has kept the Strait of Hormuz largely closed to shipping. The result, according to market estimates cited in recent commentary, is that global oil supply is operating at about 15% below normal. Governments coordinated releases from strategic petroleum reserves helped push prices down from a high near $120 per barrel recorded last Sunday, but attention has turned to the practical limits of how quickly those reserves can be put into circulation - an estimated flow constraint of approximately 3 million barrels per day.
Front-month crude futures, after that temporary cooling, have resumed their climb and are back above $100 per barrel. The rise in both oil and natural gas prices has prompted adjustments to economic forecasts from Goldman Sachs economists. In particular, Goldman raised its Core PCE inflation forecast by 20 basis points and reduced its 4Q/4Q GDP growth projection by 30 basis points to 2.2%.
Goldman quantified the shift in downside risk to growth, but still judges the probability of a U.S. recession in the coming year at about 25% - higher than before the conflict intensified but not a majority forecast. The firm also assessed the direct earnings impact on the S&P 500 from modestly higher oil prices as relatively limited in the near term. Goldman warned, however, that a prolonged period of severe disruption or extended uncertainty in energy markets would introduce a more substantial downside risk to consensus forecasts.
On a different axis, Goldman analysts emphasized that the influence of artificial intelligence on corporate profits this year is likely to outstrip that of oil. The firm continues to see advantages accruing to certain software platforms, arguing that AI models will run atop the infrastructure and data-gathering capabilities those companies provide.
Reflecting that dynamic, Goldman has updated sector and infrastructure assumptions: the bank boosted its datacenter demand forecast on February 23 and subsequently increased its power supply forecast on Monday. Goldman noted that while a minority of new power capacity will be constructed as behind-the-meter, dedicated electricity sources, the majority of incremental power requirements are expected to come from plants connected to the wider grid.
Taken together, these developments - elevated energy costs, higher bond yields and an evolving technology investment backdrop - help explain the mixed signals in markets this week. Equity indices have felt pressure from the energy-driven inflation impulse, while potential upside from AI-related earnings has been highlighted as an offsetting factor, concentrated among software and data infrastructure providers.
Investors remain attentive to the pace at which strategic reserves can be deployed, the trajectory of commodity prices, and how quickly central bank policy and economic data react to the latest cost pressures. Goldman’s revisions encapsulate both the immediate inflationary response to higher fuel prices and the offsetting growth considerations, while flagging AI as a structural factor with meaningful earnings implication this year.