US Stocks Slump on Fears of Rising Oil Prices, Inflation and Interest Rates

New York: US stocks fell after a report said inflation was poised to worsen even before the war with Iran sent oil prices soaring. That and the Federal Reserve chairman’s comments pushed Wall Street on Wednesday to see less chance of achieving the low interest rates it loves. The S&P 500 shed 1.4% for its first loss this week. The Dow Jones Industrial Average fell 1.6 percent and the Nasdaq composite fell 1.5 percent. The increase in treasury yields in the bond market negatively affected the price of gold. It fell below $5,000 per ounce.

U.S. stocks are falling on Wednesday after a report said inflation was poised to worsen even before oil prices began to rise due to the war with Iran.

The S&P 500 fell 1.1% and was heading for its first loss this week. The Dow Jones Industrial Average was down 668 points, or 1.4%, with one hour left in trading, and the Nasdaq composite was 1.1% lower.

Losses deepened after the Fed decided to keep its key interest rate steady rather than continue cuts in a bid to stimulate the job market and economy. Fed officials still plan to make another interest rate cut by the end of 2026, but Chairman Jerome Powell suggested that these forecasts may not be as valuable as usual due to increased uncertainties.

“We don’t know” what will happen to oil prices and how long it will take for the tariffs to work on the economy, Powell said.

Concerns were growing that the Fed could cut zero in 2026, given how much oil prices have risen. Brent crude oil rose from nearly $70 a barrel to $109.95 a barrel on Wednesday. It settled at $107.38, up 3.8% from the previous day. The barrel price of benchmark US crude oil settled at $96.32 after reaching nearly $99.

Oil and natural gas prices soared as the war disrupted the Persian Gulf’s energy sector. The Islamic Republic will attack oil and gas infrastructures in Qatar, Saudi Arabia and the United Arab Emirates, following an attack on facilities related to the offshore South Pars natural gas field, Iranian state television said on Wednesday.

If the cuts keep oil and gas prices high for long periods of time, they could lead to a debilitating wave of inflation that collapses the global economy.

A report published on Wednesday morning showed that inflation pressures were already worsening before the war began. He said inflation at the U.S. wholesale level rose unexpectedly to 3.4% last month, and those cost increases could hit U.S. households if manufacturers ignore them.

Those numbers were likely factors in the Fed holding its hand on Wednesday. A cut in interest rates would give a boost to the economy and investment prices, and President Donald Trump is angrily calling for it. But low interest rates will also worsen inflation.

This time, only one Fed voter wanted to cut rates, and the odds were 11-1 to keep rates steady.

Powell said the Fed’s rule of thumb is that it considers increases in oil prices, which may only be temporary, but that will only work if expectations for future inflation do not suddenly rise. He also noted that many Fed officials have lowered their rate cut forecasts this year from two to one, although the average Fed official is still calling for one.

This, along with a higher-than-expected update on inflation at the wholesale level, helped push Treasury yields higher in the bond market. The yield on the 10-year Treasury note rose to 4.25% from 4.20% at the end of Tuesday and from 3.97% before the war with Iran began.

Gold is less attractive to some investors because Treasury bonds pay more interest. Gold paid nothing to holders and fell below $5,000 an ounce after falling 2.2% to settle at $4,896.20. This rate is lower than it was at the beginning of the war, although it is known as a safe haven for investors seeking security in uncertain times.

On Wall Street, Macy’s rose 5.1% in the latest quarter after reporting stronger earnings and earnings than analysts expected. The retailer behind Bloomingdale’s and Bluemercury is in the midst of a turnaround plan that will accelerate growth under CEO Tony Spring.

But General Mills fell 2.8% after the company behind the Pillsbury, Progresso and Wheaties brands reported weaker profit than analysts expected in its latest quarter. CEO Jeff Harmening is investing in its brands in hopes of driving growth and sticking to profit forecasts for the full fiscal year.

Indices in foreign stock markets fell in Europe after the strong closing in Asia. They reacted to the rise in the price of crude oil, which accelerated as worldwide trade moved westward.

The Tokyo Nikkei 225 index rose 2.9% after the government reported that exports in February were higher than expected. South Korea’s Kospi jumped 5%.