Oil Prices Surge and Fed's Hawkish Stance Weigh on Wall Street, US Stock Futures Decline

Investing.com - On Wednesday evening, U.S. stock index futures declined slightly after Wall Street finished lower during regular trading hours, as investors digested the Fed’s hawkish shift and a new escalation in Middle East tensions, which kept oil prices high.

As of 20:24 Eastern Time (00:24 GMT), S&P 500 Futures fell 0.2% to 6,666.25, Nasdaq 100 Futures dropped 0.2% to 24,597.0. Dow Jones Futures also declined 0.2% to 46,455.0.

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Fed Keeps Rates Steady, Signals Hawkish Stance

Earlier in the day, the three major stock indexes fell sharply as traders reacted to the Fed’s latest projections and geopolitical risks.

The Dow Jones Industrial Average dropped 1.6%, the S&P 500 declined 1.4%, and the Nasdaq Composite fell 1.5%.

The Federal Reserve held interest rates steady on Wednesday, in line with market expectations, but policymakers raised inflation forecasts and maintained expectations of limited policy easing this year, signaling caution.

This decision reflects concerns among policymakers that recent oil price surges could feed into consumer prices, at a time when inflation has yet to fully return to target levels.

Fed Chair Jerome Powell stated that energy markets have become an additional source of uncertainty for inflation, warning that sustained increases in fuel costs could slow progress toward price stability.

His comments led traders to further reduce expectations of rate cuts in the near term, despite the Fed hinting at one more cut this year.

Middle East Energy Facilities Attacked, Oil Prices Break $110 per Barrel

Following an attack on Iran’s South Pars gas field (one of the world’s largest natural gas fields), Iran launched strikes on multiple energy facilities in the region, marking a significant escalation in Middle East conflict and heightening investor caution.

Reports indicate these attacks damaged infrastructure related to the Qatar Ras Laffan energy complex, reigniting fears of supply disruptions in the region.

During Thursday’s Asian trading session, oil prices continued their rally, surpassing $110 per barrel amid sharply increased geopolitical risks.

Ongoing conflicts between Iran, the U.S., and Israel have raised concerns over the flow of crude through the Strait of Hormuz (a critical global shipping route), with traders increasingly factoring in the risk of prolonged supply interruptions.