Wall Street is currently facing two types of risks simultaneously: one stemming from the energy price shock triggered by the escalation of conflicts in the Middle East, and the other from the re-exposure of liquidity and valuation issues in the private credit market. The combination of these factors led the U.S. stock market to noticeably shift into defense mode on Thursday.
Energy Shock Dominates Pricing Again
Following the escalation in the Middle East, oil prices have once again approached $100 per barrel. The market's concerns extend beyond short-term oil price fluctuations to the potential prolongation of transportation risks related to the Strait of Hormuz, which, through fuel, shipping, and industrial costs, could contribute to global inflation. High oil prices are quickly suppressing cost-sensitive sectors such as airlines, cruise lines, and discretionary spending, while boosting the performance of energy stocks.
Private Credit Becomes a New Pressure Point for the Financial Sector
In parallel with the oil price shock, there is unease in the private credit market. Morgan Stanley's restriction on redemptions from a private credit fund reflects the greater challenge in managing the liquidity of non-public credit assets in a high-interest rate environment with cooled risk appetite. Previously, Blackstone and BlackRock have taken similar measures, and JPMorgan has also downgraded the valuations of some related loans.
There is currently no confirmation that systemic risk has formed, but investors are beginning to re-evaluate a key issue: how many institutional balance sheets hold these assets, at what valuations, and whether redemption restrictions will spread from individual products to a broader range of asset management platforms.
Interest Rate Cut Expectations Postponed
Against this backdrop, the Federal Reserve's easing expectations have also been forced to adjust. Goldman Sachs has postponed its expectation for the next rate cut from June to September and now anticipates only 25 basis point cuts in both September and December of 2026. The core basis of this prediction is that the energy surge spurred by the Middle East conflict may make the inflation reduction process more unstable.
Market Implications
This means that the current U.S. stock market is trading not merely on "growth slowdown," but on the combined risk of "high oil prices and credit tensions." If energy supply risks continue to escalate, and more redemption restrictions or valuation downgrades occur in the private credit market, financial and cyclical sectors may remain under pressure, and market volatility could stay at a high level.
