Stocks and bonds fall as war drives up oil prices, according to the Fed – US Market Wrap

Wall Street remained on edge as an oil rise sent stocks and Treasuries lower, with Fed’s Powell predicting that increased energy costs will raise inflation, clouding the outlook for rate reduction.
While the central bank maintained its predictions for a drop in 2026 and another in 2027, traders lowered their expectations for a rate cut this year. Treasury yields rose after Powell said it’s vital to keep interest rates slightly restrictive while acknowledging the Fed’s difficult situation. The S&P 500 fell 1.4%. Brent neared $110 in post-settlement trade.
Markets were spooked again as Iran and Israel traded blows on vital Middle Eastern energy infrastructure, undermining US efforts to calm markets as the crisis entered its 19th day.
“The implications of developments in the Middle East for the US economy are uncertain,” Fed officials said Wednesday in a post-meeting statement. “The committee is attentive to the risks to both sides of its dual mandate.” .
Fed’s Powell underlined the need for success in decreasing inflation, particularly goods inflation caused by tariffs, before resuming rate cuts.