Oil Volatility Shifts Fed Rate Cut Expectations

The morning saw Brent crude, the international standard, briefly top $119 per barrel, up from roughly $70 before the war with Iran. This jump followed intensified Iranian attacks on oil and gas facilities, escalating fears of long-term Middle East supply disruptions and global inflation.

European and Asian markets reacted sharply, with Japan's stock index dropping 3.4%, Germany's 2.8%, and South Korea's 2.7%. However, oil prices pared gains, with Brent settling at $108.65, up only 1.2%, and U.S. crude falling towards $94.

This helped Wall Street pare losses, with the S&P 500 finishing down 0.3%, the Dow Jones Industrial Average down 0.4% (203 points), and the Nasdaq composite down 0.3%. The two-year Treasury yield initially jumped to 3.96% before receding to 3.79%.

Traders, according to CME Group data, now assign a 73% chance the Federal Reserve will hold or raise rates this year, a stark reversal from a month ago when a 74% probability of multiple cuts was expected. Fed Chair Jerome Powell's recent comments were discouraging regarding 2026 rate cuts.

Gold sank 5.9% to $4,605.70, and silver dropped 8.2%. Newmont slumped 6.9%, and Freeport-McMoRan fell 3.3%.

Rivian Automotive rose 3.8% on a partnership with Uber Technologies, which fell 1.7%. President Donald Trump and Israeli Prime Minister Benjamin Netanyahu are involved in de-escalation efforts.