By Megan Leonhardt

Oil, Oil, Oil. A month ago, the latest inflation report might have spurred a stock-market rally. The consumer price index showed prices rose 2.4% in February, roughly in line with estimates and matching January's pace.

But these days the market has one thing on its mind: the price of oil. And today, both primary oil benchmarks -- West Texas Intermediate and Brent Crude -- rose roughly 4.5%.

Stocks largely fell in response, based on their inverse relationship to oil that's dominated markets since the Iran war began almost two weeks ago.

The Dow Jones Industrial Average closed down 289 points, or 0.6%. The S&P 500 dipped 0.1%. The Nasdaq Composite managed to gain 0.1%.

The wider economic impacts of the conflict remain more muted -- at least for now. Elevated energy costs are inflationary and they tend to reduce Americans' capacity to spend and constrain businesses' hiring and capital expenditure plans, given that more of the budget must be allocated to fuel costs. But the magnitude of those economic effects very much depends on the price fallout.

If prices settle around $100 a barrel, it could erase 0.1% of real gross domestic product growth that we'd otherwise see. Manageable. If they're consistently above $150, that could trigger a recession. For now, investors are watching closely trading it day by day.

The Hot Stock: Mosaic +10.1% The Biggest Loser: Fair Isaac -9.3%

Best Sector: Energy +2.5% Worst Sector: Consumer staples -1.3%

Why You Should Care about CPI

An editor who shall remain nameless told me today that no one seemed to care about the latest consumer price index print -- that it was stale data in the wake of rising oil prices.

And, to some extent, that's true. Today's reading didn't encompass the 33% jump in oil prices that has taken place since the onset of the Iranian war. The energy spike is expected to push up inflation prints in the coming months.

But today's data do provide a baseline -- and not a bad one at that -- from which to track the impact of the oil shock. Headline CPI rose 2.4% last month from a year earlier, matching January's annual pace and coming in a tad lower than economists' forecasts. Stripping out more volatile food and energy prices, inflation measured 2.5% year over year.

Looking under the hood, it was interesting to see that food and energy prices were already showing signs of strengthening ahead of the rise in oil prices. That's likely to keep affordability issues squarely in focus in the coming months.

Additionally, price increases in categories like appliances, apparel, and video equipment show that the gradual impact of higher tariffs is coming through -- just like the producer price index and Institute for Supply Management's purchasing managers indexes have already hinted at. If this trend picks up steam at the same time that the oil shock flows into inflation data in the coming months, it could make for some ugly numbers.

The details of Wednesday's CPI data also point to a firmer print for the personal consumption expenditures, or PCE, price index, which is the Fed's preferred inflation gauge. Software prices, for example, jumped by 6.5% month over month in the February CPI data. These are a bigger component of the PCE measure.

Although Fed officials typically "look through" temporary price shocks (like the current oil surge), Bank of America Securities economists Stephen Juneau and Aditya Bhave paint a cautious picture. "The Fed can only look through so much of the recent firming in core PCE. Tariffs and special factors have certainly played a role, but the data continue to signal underlying inflation is above 2%."

While CPI data remain benign (mostly thanks to softer shelter prices that could be due to data distortions stemming from the government shutdown), PCE inflation data aren't making a strong case for cuts. The upside risks from oil prices only adds to that conundrum.

Economists at Citi and Bank of America estimate that core PCE inflation rose 0.4% month over month in February, up from around 0.3% before the release of the CPI data. Compared with a year ago, that leaves core PCE at 3.1%.

February's PCE reading won't be released until April 9. Markets will first get January's PCE inflation data on Friday, a delay caused by the government shutdown. Economists are calling for a 2.9% increase in both core and headline PCE inflation on an annual basis.

Policymakers are likely to keep interest rates steady at next week's March 17-18 meeting. What comes after that, however, is less clear.

The Calendar

Adobe, Dollar General, Ulta Beauty, Lennar, Dick's Sporting Goods, and Li Auto release quarterly results tomorrow.

What We're Reading Today

   -- Why Oil Prices Are Still Higher Despite Record IEA Oil Reserves Release 
 
   -- JPMorgan Tightens Lending to Private Credit, Reports Say. 
 
   -- Oracle Stock Jumps After Earnings Beat Expectations. Why It 'Will Not Be' 
      Disrupted. 
 
   -- Bill Ackman Has a Stroke of Genius. Will it Work? 
 
   -- This Physical AI Stock Jumped on Earnings. The Robots Are Coming. 

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March 11, 2026 19:55 ET (23:55 GMT)

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