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Dow Jones leads Wall Street lower as oil prices spike on Iran threats, Fed awaited

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Dow leads stocks lower as Powell flags slower rate cuts Proactive uses images sourced from Shutterstock

US stocks tumbled Wednesday as investors wrestled with renewed inflation fears and the prospect that the Federal Reserve could hold off on rate cuts longer than expected.

The Dow Jones dropped 768 points, or 1.6%, to 46,225. The S&P 500 fell 91 points, or 1.4%, to 6,625, while the Nasdaq lost 327 points, or 1.5%, to 22,152. Small caps were also hit, with the Russell 2000 sliding 41 points, or 1.6%, to 2,479.

Investors seemed spooked after Federal Reserve Chair Jerome Powell spoke, underscoring ongoing inflation worries and signaling that the central bank could hold off on rate cuts longer than some had hoped, especially with oil prices surging.

“This is a central bank that’s comfortable waiting, watching, and staying flexible,” said Gina Bolvin, president of Bolvin Wealth Management Group in Boston.

“One projected cut tells you everything: the Fed is not in a rush, and neither should investors be. This is no longer a policy-driven market—it’s a fundamentals-driven one. The next phase belongs to companies that can grow without relying on lower rates.”

Investors will now be turning their attention to corporate earnings, with semiconductor giant Micron scheduled to report after the bell, which could provide some direction for tech stocks.

Analysts said the Fed’s move reflects a careful balance between maintaining economic growth and managing inflationary pressures.

“The Fed is choosing to look through the fog of conflict, for now,” said Jamie Cox, managing partner at Harris Financial Group. “A dual mandate Federal Reserve is not going to rock the interest rate boat during a supply shock.”

Rising energy costs from Middle East tensions have compounded inflationary pressures. Brent crude has surged nearly 50% since late February, pushing US gasoline prices to their highest levels since 2023. Economists say this rise affects consumer purchasing power and inflation expectations, complicating the Fed’s policy decisions.

“One rate cut is still possible this year, but any easing is expected to be gradual,” Antonio Di Giacomo, senior market analyst at XS.com, noted.

Labor market data signal a moderate slowdown in job creation in some sectors, suggesting an orderly rather than abrupt cooling of the economy.

Jeffrey Roach, chief economist at LPL Financial, added that the Fed removed references to “signs of stabilization” in its statement, reflecting ongoing caution in light of weak Q4 2025 growth and elevated petroleum prices. “The likely productivity boost from AI could help offset slower population growth, shrinking labor force, and persistent services inflation,” Roach said.

  • Macy’s, Inc. (NYSE:M) beat Q4 earnings expectations, reporting $1.67 per share versus the $1.56 consensus, lifting its stock about 5%.

  • Nextech3D.AI (CSE:NTAR, OTCQX:NEXCF, FRA:1SS)’s recently acquired division Krafty Labs became profitable in its first full month, supporting the company’s goal of achieving cash-flow positive operations in 2026.

  • VivoPower PLC (NASDAQ:VIVO, FRA:51J) jumped 23% after the company terminated its $180 million F-3 registration statement, halting further share sales under the filing.

Equities held steady on Wednesday after the Federal Reserve left interest rates unchanged, in line with market expectations, while flagging uncertainty tied to developments in the Middle East.

Fed Chair Jerome Powell said the central bank would maintain a cautious stance as it assesses evolving risks, with policymakers noting that the economic implications of geopolitical tensions remain unclear.

The decision was not unanimous. Governor Stephen Miran dissented in favor of an immediate rate cut, underscoring some division within the committee over the appropriate policy path.

The Fed’s updated Summary of Economic Projections showed little change to its expected rate trajectory. Officials continue to anticipate one rate cut in 2026 and another in 2027. The March “dot plot” kept median projections steady through 2028, while nudging the longer-run neutral rate higher to 3.125% from 3.000%.

Under the updated projections, the policy rate is seen at 3.375% in 2026, 3.125% in 2027, and 3.125% in 2028, with the longer-run rate also at 3.125%.

Markets showed a muted reaction, with investors largely digesting the steady policy outlook and the Fed’s acknowledgment of heightened geopolitical uncertainty.

What had appeared to be a tentative recovery in equities this week was undermined by fresh reports of assaults on Iran’s gas infrastructure, rattling investor confidence.

“The rally had always been precarious given tonight’s Fed decision, but the market really doesn’t like seeing energy infrastructure directly targeted,” said Chris Beauchamp, chief market analyst at IG.

“Anxious traders now wait to see how Iran will respond to this fresh escalation, but with oil prices heading higher again a retest of the recent lows seems to be on the cards.”

Today’s PPI report came in stronger than expected, analysts at Bank of America acknowledged.

“The details of the report that pertain to PCE inflation, however, were modestly softer than we had penciled in,” analysts noted.  “This was mainly due to weaker inflation in health services.”

The bank is now tracking core PCE at 0.40% m/m for February (3.0% y/y), down from 0.43% m/m after the CPI data. Headline inflation should also print at 0.40% m/m and 2.8% y/y.

“Bottom line, the PCE inflation data remain stubbornly high, and Iran poses upside risks to the outlook,” analysts wrote. “Therefore, we think the Fed will have a hard time arguing that the inflation data justify near-term rate cuts.”

US producer prices climbed more than expected in February, underscoring persistent inflation pressures at the wholesale level.

The Producer Price Index (PPI) rose 3.4% year-on-year, above analysts’ estimate of 3%, while the monthly gain was 0.7%, nearly double the expected 0.3%.

Core PPI, which excludes volatile food and energy costs, also outpaced forecasts. Core prices increased 3.9% from a year earlier, versus an expected 3.7%, and jumped 0.5% on the month, above the 0.3% estimate.

The data adds to evidence that inflation remains sticky, potentially influencing the Federal Reserve’s policy decisions in the coming months.

US stocks have opened lower, after oil prices rebounded on new threats from Iran to retaliate against Gulf energy infrastructure.

The Dow Jones started with a 0.5% drop, with the S&P 500 and Nasdaq falling 0.3%.

Biggest fallers on the Dow are Amgen, Coca Cola and Procter & Gamble.

Among the big tech names, Nvidia, Alphabet and Apple are flat, with the Mag 7 all slightly in the red.

WTI oil has risen to above $98 a barrel, with Brent crude topping $108 as newswires reported that Gulf oil and gas producers were evacuating “multiple sites” after warnings of attacks from Iran.

US stocks are set to open slightly higher on Wednesday as investors react to oil price fluctuations and brace for the Federal Reserve decision and forecasts later in the day.

Futures for the Dow Jones, S&P 500 and Nasdaq were all up around 0.1%, down from gains of 0.3-4% earlier, after oil prices hardened.

European indices were higher this morning, with positive closes across Asia-Pacific overnight, but saw gains pared as oil prices reacted to the latest headlines.

That follows a positive Wall Street session the day before, where the Nasdaq again led the way with a 0.5% gain to close at 22,480, while the S&P 500 added 0.25% points to 6,716 and the Dow edged up 0.1% to 46,993.

Energy stocks lagged after WTI crude slipped to below $92 a barrel, helped by a rise in US crude inventories reported by the American Petroleum Institute. The US Energy Information Administration releases its own inventory figures later today.

As the clock ticked towards the opening bell in New York, WTI climbed back above $96 a barrel, with Brent crude rising above $106 a barrel.

It came on the back of reports that Iran has taken parts of its South Pars gas field offline following recent strikes, raising concerns over tighter LNG supply and rising global energy costs.

Joshua Mahony at Scope Markets said that the recent release of strategic oil reserves was “expected to keep a lid on prices for the time being,” though he warned that “the tightness in global energy markets does look likely to provide major risks for markets as we go forward.”

This means traders may be distracted when the Federal Reserve publishes the decision from the March meeting of the Federal Open Market Committee, which is widely expected to hold interest rates steady.

Investors will also focus on the Fed’s latest ‘dot plot’ showing where policymakers expect interest rates in coming months for any signs of increased hawkishness.

Mahony expects the dot plot “to take a hawkish turn given the ongoing conflict,” but adds that “the realisation that these forecasts are likely to change will lessen their impact.”

Fed chair Jerome Powell will hold what will be his penultimate press conference ahead of his retirement from the role in May.