The S&P 500 is having a rough week. It closed lower three out of the last four sessions, ending Tuesday at 6,816.63. That's its weakest close since late November and, more painfully, below where it started the year. The main culprit? A growing sense of unease about a potential prolonged conflict between the U.S. and Iran, which kept investors on edge even after some calming comments from former President Donald Trump offered a brief respite.

And if you're looking for a crowd-sourced sentiment check, the folks on the prediction market Polymarket aren't feeling optimistic. Traders there are placing their bets, and as of now, it's a pretty lopsided affair: 77% are betting the S&P 500 will open "Down" on Wednesday, with only 23% taking the "Up" side. There's about $28,301 in volume riding on this particular yes-or-no question for March 4.

Why Oil Prices Are the Ghost at the Feast

Here's the simple, scary connection for stocks. The global benchmark for oil, Brent crude, shot up 5.8% on Tuesday to settle at $82.14 a barrel. That's its highest price since July of last year, and it's surged nearly 20% in just two sessions. Why does this matter for the S&P 500?

It's an inflation story. Higher oil prices generally lead to stickier inflation. And stickier inflation means the Federal Reserve is more likely to keep interest rates higher for longer. That removes the rate-cut safety net that the stock market has been quietly (or not so quietly) leaning on all year. The index is already down about 4% from its late-January peak, and there's no clear catalyst in sight to turn things around. The mood is reflected in the CBOE Volatility Index (VIX), Wall Street's so-called "fear gauge," which jumped to 23.57—its highest level since November.

Wednesday brings another data point into the mix: the ADP private payrolls report for February. The consensus expectation is for 48,000 jobs added, which would be a solid rebound from the 22,000 added in January. After the market closes, we'll also get earnings from the chip giant Broadcom (AVGO).

The Case for a (Slightly) Less Gloomy Outlook

It wasn't all doom and gloom on Tuesday, though. If you look closely at the tape, the closing level actually tells a story of resilience. The index managed to recover most of its steep intraday losses. This bounce coincided with Trump's announcement that the U.S. Navy would escort commercial tankers through the critical Strait of Hormuz. He also said he ordered the U.S. Development Finance Corporation to provide political risk insurance and financial guarantees for trade moving through the strait. In essence, it took the worst-case scenario of a total supply disruption partially off the table, which the market appreciated.

There's also some historical context that bulls might find comforting. According to a report citing data from strategists at Carson Group, following major geopolitical events, the S&P 500 has historically averaged a loss of just 0.9% in the subsequent month. More importantly, it then gained an average of 3.4% over the following six months. Markets tend to absorb shocks and move on.

As of now, the futures market is pointing lower. S&P 500 futures are trading at 6,782, down about 42.75 points or 0.63%.

For what it's worth, the Polymarket crowd nailed their previous prediction. They bet the S&P 500 would open down on Tuesday, and it did, opening sharply lower at 6,800.26. That "Down" bet resolved with over $420,090 in traded volume. They'll be looking to make it two in a row on Wednesday.