Markets hit new records, oil and the Fed: Wall Street buys profits, the economy buys time

Three days in which the market chose to look beyond the risk

Between Wednesday, April 29th, Thursday, April 30th, and Friday, May 1st, financial markets experienced an almost symbolic sequence: on one side, the US-Iran war, oil prices above $100, European inflation rising, and the Fed still stuck; on the other, Wall Street was able to revise all-time highs, buoyed by corporate earnings and the strength of the technology sector. It was a week in which the market decided not to ignore risk, but to price it as manageable noise, at least as long as earnings continue to surprise.

On Wednesday, the spotlight was on Jerome Powell. The April 28-29 meeting was likely his last as Federal Reserve chairman: his term expires on May 15, and his designated successor, Kevin Warsh, is preparing to take over. Powell left rates unchanged at 3.50%-3.75%, but his message was far from dovish: inflation remains high, partly due to rising energy prices, and developments in the Middle East are keeping uncertainty high. The Fed has therefore chosen the most prudent course: no cuts, no hikes, but wait.

Oil: The Real Nervous Center of the Week

The energy market remained the heart of tension. In Fujairah, United Arab Emirates, refined petroleum product inventories fell 6.3% in the week ending April 27, reaching 6.982 million barrels—under the 7 million mark and their fourth consecutive record low. Even more importantly, according to data from the Fujairah Oil Industry Zone, inventories have fallen 66% since the start of the US-Iran war. This number better illustrates than many press releases how the Strait of Hormuz crisis is sapping the ability to absorb sudden shocks.

On Thursday, Brent crude hit an intraday high of $126.41 a barrel, its highest level since March 2022, following rumors of new US military options against Iran. Then, on Friday, news of a new Iranian proposal to the United States, brokered through Pakistani mediators, dampened some of the geopolitical premium: Brent crude fell to $108.78, while WTI crude returned to the $101.67 area. However, oil remains at levels likely to fuel inflation, industrial costs, and political tension.

European inflation: Germany, France, and Italy heat up again

Energy risk immediately spilled over into European macroeconomic data. In Germany, preliminary inflation rose to 2.9% annually in April, from 2.7% in March, while core inflation fell to 2.3%. This is an interesting read because it suggests two things at once: core inflation is improving, but energy is reopening the headline problem. In France, the harmonized index rose to 2.5%, from 2.0% in March, with energy up 14.2% year-over-year. In Italy, NIC inflation jumped to 2.8% from 1.7%, while the harmonized HICP index rose to 2.9% from 1.6%.

This isn't a technical detail. It's the reason why the ECB also left its deposit rate unchanged at 2% on Thursday, but warned that the Iranian conflict and disruptions to energy flows through Hormuz increase upside risks to inflation and downside risks to growth. The 10-year German Bund remained in the 3.05% range, while the 10-year US Treasury hovered around 4.38% on Friday: levels that confirm a bond market no longer willing to easily bet on rapid cuts.

Wall Street: New Records Despite Fed and Oil

Yet US stocks continued to rise. On Thursday, the S&P 500 gained 1.0%, closing at 7,209 points; the Nasdaq rose 0.9% to 24,892 points; and the Dow Jones rose 1.6% to 49,652 points. By mid-session on Friday, the S&P 500 was still up 0.58% to 7,251 points and the Nasdaq was up 1.07% to 25,159 points, both at new all-time highs. The main reason was not geopolitics, but earnings: estimates for S&P 500 first-quarter earnings growth rose to 27.8%, the fastest pace since the fourth quarter of 2021.

In Europe, many stock markets were closed on Friday for May Day, including the Euronext markets in Milan and Paris. The useful snapshot therefore remains that of Thursday: Euro Stoxx 50 at 5,874 points, +1.00%; FTSE MIB at 48,246 points, +0.94%; Stoxx 600 +1.4%; DAX +1.3%; CAC 40 +0.5%. Here too, the market absorbed inflation and oil thanks to the rebound in energy prices and the sense that, at least for now, the shock is not impacting corporate profits.

Currencies and metals: Yen leads the way, gold loses steam

On the currency front, the strongest movement came from the yen. After breaking above 160 yen against the dollar, Japanese intervention pushed the currency up 2.5% in a single day, dropping to 155 yen per dollar. It was the yen's best day since 2022 and shows how sensitive governments are becoming to the combined effects of expensive oil, a weak currency, and imported inflation.

Metals told a more nuanced story. Gold rose 0.3% on Friday to $4,636.72 an ounce, but remains down 1.6% for the week, weighed down by higher real rates and the perception that central banks cannot cut rates quickly. Silver, on the other hand, recovered 3.4% to $76.26, while platinum and palladium closed at $2,002 and $1,537, respectively. Industrial metals remain more vulnerable: copper and the manufacturing sector are struggling with structural shortages, higher energy costs, and the risk of weaker demand.

The American economy is growing, but with less clear signs

US GDP grew by 2.0% annualized in the first quarter, better than the 0.5% growth recorded in the fourth quarter of 2025, but below the most optimistic expectations. The composition is mixed: investment, exports, consumption, and government spending contributed positively, but consumption slowed, and the PCE index rose to 4.5%, with the core PCE index at 4.3%. This is the key point: the economy is still growing, but it is doing so with higher inflation and less room for the Fed to make adjustments.

Meanwhile, US public debt held by the public has surpassed 100% of GDP for the first time since World War II, approaching 1946 levels. The CBO projects debt from 101% of GDP in 2026 to 120% in 2036, with structural deficits and interest rates compressing fiscal space. This doesn't necessarily move the market overnight, but it does change the long-term context: if growth, rates, and debt remain high, the margin for error in economic policy narrows.