U.S. stocks hold their losses after the Federal Reserve opts again not to cut interest rates

U.S. stocks are sinking Wednesday after a discouraging report said inflation was primed to worsen, even before the war with Iran sent oil prices spiking.

The S&P 500 fell 0.5 per cent and was on track for its first loss this week. The Dow Jones Industrial Average was down 404 points, or 0.9 per cent, as of 2:05 p.m. Eastern time, and the Nasdaq composite was 0.5 per cent lower.

Stocks held onto their losses after the Federal Reserve decided to keep its main interest rate steady, instead of resuming cuts meant to give the job market and economy a boost. Fed officials, though, did indicate they could lower rates once by the end of the year, the same as they were signaling before the war began.

Worries had been rising that the Fed could indicate zero cuts for 2026 given how much oil prices have soared. A barrel of Brent crude has jumped from roughly US$70 per barrel to as high as $109.95 on Wednesday. The price for a barrel of benchmark U.S. crude got as high $98.67 before receding to $94.60, down one per cent from a day before.

Oil and natural gas prices have spiked because of the war’s disruptions to the Persian Gulf’s energy industry. Iran’s state television said Wednesday that the Islamic Republic would be attacking oil and gas infrastructure in Qatar, Saudi Arabia and the United Arab Emirates after an attack on facilities associated with its offshore South Pars natural gas field.

If the disruptions keep oil and gas prices high for long, they could send a debilitating wave of inflation crashing into the global economy.