Next week's U.S. employment report headlines a fresh batch of economic data for stock investors, who also will closely follow developments in an Iran war that is entering its second month.

Markets will continue to fixate on the fallout for energy prices from the Middle East conflict, which has choked off a big chunk of oil supplies. U.S. crude is up more than 60% year-to-date to nearly $100 a barrel, leading U.S. gasoline prices to surge to $4 a gallon, which could squeeze consumer spending.

As investors worried about inflation, benchmark Treasury yields jumped to their highest since last summer, creating a possible pressure point on equity valuations.

Sharp stock market declines on Thursday put the benchmark S&P 500 on pace for its fifth straight weekly drop, extending its slide to nearly 6% since the U.S.-Israeli military strikes on Iran in late February. The Nasdaq Composite ended down more than 10% from its October all-time high, confirming it was in a correction.

During the week, conflicting indications of potential de-escalation of the crisis whipsawed asset prices, and stocks were likely to remain "headline driven" in the coming days, said Jim Baird, chief investment officer with Plante Moran Financial Advisors.

"Any signs of positive breakthroughs in terms of discussions with Iran and a cessation of the conflict there would go a long way towards providing some reassurance to investors and a boost in sentiment," Baird said.

"Anything that would lead to indications that this might become more long and drawn out, that would be a negative for investor sentiment and certainly would weigh on the market," the CIO added.

Tuesday brings an end to a rough first quarter for U.S. equities. On top of the Iran conflict, concerns about business disruptions from artificial intelligence and weakness in the private credit market also have rattled stocks.

The S&P 500 is down more than 5% so far in 2026, following three straight years of solid double-digit percentage gains.

"There’s a lot of uncertainty out there overall," said James Ragan, co-CIO and director of investment management research at D.A. Davidson. "So as we get into the last couple of days of the quarter, I just think you could see the market sentiment kind of rolling over a little bit."

A POSITIVE JOBS NUMBER?

The payrolls report for March is expected to show an estimated increase of 48,000 jobs and an unemployment rate of 4.5%, according to Reuters data. The report is due on April 3, when U.S. stock markets will be closed for the Good Friday holiday.

The prior report for February was surprisingly weak, showing a decline of 92,000 jobs. Given that two of the past three monthly reports yielded negative job growth, "any positive number would probably be good for the market," Ragan said.

Retail sales data for February and reports on manufacturing and services activity are also due next week.

Worries about a deteriorating labor market prompted the Federal Reserve to cut interest rates last year. But the U.S. central bank will face a bind if more severe employment concerns arise.

Inflation was already above the Fed's target, so surging energy prices present an obstacle to further rate cuts. Now, markets are factoring in no more rate cuts for this year, with fed funds futures actually pricing in a modest chance of a hike in 2026, according to LSEG data as of Thursday.

'SAFE DISTANCE FROM INFLATION'

Meanwhile, the benchmark 10-year Treasury yield has climbed to 4.4% from about 4% before the war started.

"The equity market is also taking very careful notice" of the rise in yields, said David Bianco, Americas chief investment officer at DWS. "This affects so many things," he said, including mortgages, the debt sustainability of the U.S. government and what is a fair price-to-earnings valuation.

Indeed, the market's valuation has moderated in recent weeks. The S&P 500's P/E ratio, based on earnings estimates for the next 12 months, was last just under 20, down from over 22 at the start of the year, according to LSEG Datastream. That P/E ratio remains well above its long-term average of 16.

Investors are seeking to understand implications for corporate profits from the war and the resulting surge in energy prices. In the face of higher fuel and other costs, companies such as Delta Air Lines and FedEx recently had reports that encouraged investors.

Nike will post quarterly results on Tuesday, while the bulk of first-quarter results are a couple of weeks away.

"I think the U.S. economy remains a safe distance from recession," Bianco said. "We can debate the odds of recession going up as oil prices go up, but I still think we are a safe distance from a recession being likely."