Last year around this time, Wall Street was going through an extreme volatility period, as President Trump, fresh off of taking office for his non-consecutive second term, started announcing massive tariff hikes on other countries to address the trade deficits, as well as to force Canada and Mexico to better police the illegal drugs coming through their shared borders with the United States.
The hiked tariff rates were eventually lifted, and countries (and the European Union as a bloc) began to sign trade deals with the US—those deals have since come into question as the Supreme Court ruled that the President does not have the power under IEEPA to unilaterally set tariff rates. The 1977 International Emergency Economic Powers Act (IEEPA) was the basis for the new impost rates agreed in the trade deals.
In 2025, President Trump’s first year back in office, the Dow Jones stock index was down 13 per cent year-to-date in April. As the new trade deals began rolling out, it recovered and went on a massive rally in the second half of the year, eventually ending with a 13.5-per-cent gain for the annum. The more inclusive S&P 500 index followed the same pattern: after massive losses in April, it ended up gaining 16.39 per cent.
Two major factors fuelled those gains: one, the Federal Reserve cut rates by 25 basis points three times, bringing the federal interest rate down to 3.75 per cent. And two: mainly due to heightened domestic crude oil production, the average cost of a gallon of gas was on a steady decline in the USA throughout the year, dropping below $3 in early December for the first time in over four years.
However, with the US–Israeli joint strikes on Iran, the second factor has been completely reversed.
Crude oil prices jumped on international commodity markets. A barrel of West Texas Intermediate (WTI) crude oil rose from around $67 on 27 February to $77.44 on 3 March. Since yesterday, its price has dropped and stabilized at roughly $75–$76. Thus, it seems that the $119-per-barrel crisis seen after the Russian invasion of Ukraine has been averted.
As of today, AAA reports that the average cost of a gallon of gas is up to $3.198 in the United States.
The Dow Jones ended both trading days with moderate losses following the US–Israel strike on the weekend, as it is still currently up 0.25 per cent year-to-date. The S&P 500 actually posted a slight gain on Monday, just to drop the next day significantly, and is down 0.61 per cent for the year.
The problem is that the major stock indices in the US already came under big pressure on Friday, 27 February, as the Producer Price Index (PPI) report showed a lot bigger inflation in wholesale prices than the markets anticipated, 0.8 per cent month-to-month, as opposed to the expected 0.3 per cent. Increased fuel prices provide additional upward inflationary pressure.
However, last year’s swings have taught many investors not to be a ‘Panican’, to use the witty term coined by President Trump himself. We need to look for two major sources of good news for the markets. One, either a swift capitulation of the remnants of the IRGC regime in Iran or their willingness to de-escalate and negotiate. And two, further rate cuts by the Federal Reserve in the United States. Fed Chair Jerome Powell’s term is up this May, and President Trump will have the chance to appoint someone who is willing to more aggressively keep lowering interest rates.
Related articles:
