Dow at its lowest since November, Brent close to $110, Fed warning: results of the 19th day of war

Three major U.S. indexes declined on Wednesday, March 18, after oil rose in price due to Iran's new threats to the oil infrastructure of neighboring countries. The cost of Brent jumped 6% in trading and approached $110. The U.S. Federal Reserve kept its key rate at the current level and said that "the implications of events in the Middle East for the economy remain uncertain" and the sustainability of inflation could prevent rate cuts.

- The blue-chip index Dow Jones Industrial Average fell by 768 points, or 1.63%, on March 18.

- The Nasdaq Composite Technology Sector Index lost 1.46%.

- The S&P 500 broad market index was down 1.36% on Wednesday.

- Brent crude futures were up more than 6% to $109.8 a barrel at the close in New York, while WTI futures were adding 2.3%, rising to $98.6 a barrel.

- The CBOE Volatility Index (VIX), also called the "Wall Street Fear Index," rose 11.6 percent to nearly 25 points on March 18. The psychological mark above which the market is considered highly volatile is at 20 points.

- Spot gold prices collapsed by 3.6% to $4825.7 per troy ounce. Silver prices fell by 4.7% to $75.54.

- Bitcoin was down 5% to about $70,700, CoinGecko shows.

The Fed kept its key rate in the 3.5-3.75% range for the second consecutive time, indicating in a statement following the meeting that "the implications of events in the Middle East for the U.S. economy remain uncertain." The regulator still expects one rate cut this year and one in 2027.

At the same time, Fed Chairman Jerome Powell warned that without progress on inflation, monetary policy easing should not be expected. However, he himself expects improvements in this direction. "Our forecast is that we will continue to make progress in reducing inflation - not as quickly as we had hoped, but still with some progress," said Powell (quoted by CNBC).

The Producer Price Index (PPI), which measures changes in wholesale prices, rose 0.7% in February. Economists surveyed by Dow Jones had expected 0.3%, CNBC wrote. The report shows that inflation was already in a vulnerable position even before the outbreak of war with Iran, an event that has heightened fears of stagflation amid rising oil prices, the channel notes.

Oil prices rose after Israel struck Iran's largest gas processing facility in Bushehr province, and Iran responded by threatening to attack oil facilities in Saudi Arabia, the UAE and Qatar. The country has already launched a new wave of attacks on the UAE's energy infrastructure this week, heightening investor fears over oil and fuel supplies.

Already after the markets closed in the United States, Qatari authorities reported that Iran had launched a missile attack on the Ras Laffan industrial complex, where the world's largest liquefied natural gas (LNG) plant is located, Bloomberg wrote. The facility suffered "serious damage," authorities said. QatarEnergy did not specify which facilities were affected.

Meanwhile, Saudi Arabia has restored more than half of its oil exports to bypass the Strait of Hormuz blocked by Iran, according to Bloomberg.

- A spike in energy prices threatens to add to price pressures while curbing economic growth, Thornburg Investment Management portfolio manager Christian Hoffman says as quoted by Bloomberg. The main problem for the economy is that inflation remains stubbornly high and energy is getting more expensive, which narrows the Fed's room for maneuver, he argues.

At the same time, Hoffman noted, one important point is still underestimated: high oil prices also have a disinflationary effect, as they weaken demand. In other words, energy is not only an inflation risk, but also a factor of pressure on the economy, he says.

The news is being updated

This article was AI-translated and verified by a human editor