Stocks Rally as Oil Prices Fall on Iran Deal Optimism; Fed Eyes Inflation Fight
U.S. stock markets jumped 1-1.5% on Wednesday as crude oil retreated and President Trump signaled progress on Iran negotiations, though Fed officials remain concerned about persistent inflation pressures and may need to raise rates instead of cutting them.
Market Rally on Geopolitical Relief
Stocks jumped on Wednesday as oil prices and U.S. Treasury yields slid amid growing optimism that the conflict in the Middle East could soon be resolved. The Dow Jones Industrial Average advanced 645.47 points, or 1.31%, closing at 50,009.35. The S&P 500 rose 1.08% to 7,432.97, while the Nasdaq Composite added 1.54% and ended at 26,270.36. This came after President Donald Trump told reporters the administration was in the "final stages" of negotiations with Iran, per a pool report.
Oil Retreat and Treasury Moves
West Texas Intermediate futures shed 5.66% to close at $98.26 per barrel. Brent crude pulled back 5.63% to settle at $105.02 a barrel. Energy price declines eased inflation concerns that had rattled markets in recent weeks, supporting broader equity gains across sectors.
Fed Inflation Concerns and Rate Outlook
Federal Reserve officials' concerns about inflation being stoked by the Iran war intensified last month, with a growing number of them saying the central bank should lay the groundwork for a possible rate hike, a sign that incoming Chair Kevin Warsh will inherit an increasingly hawkish crew of central bankers. In April, inflation rose at its fastest pace in almost three years, driven by surging oil and gas prices. As a result, financial markets see little chance that the Fed will move to cut interest rates in 2026. The probability of a rate hike this year has increased, according to CME FedWatch, which predicts changes to the Fed's benchmark rate based on futures prices.
Inflation Forecast and Consumer Impact
Consumer price inflation is projected to hit 6% for the second quarter, according to the Survey of Professional Forecasters, a blue-ribbon group that is polled each quarter by the Federal Reserve Bank of Philadelphia. The average rate on a 30-year mortgage stood at 6.36% on Wednesday, up from 5.98% at the end of February, according to Freddie Mac.