More fluctuations in oil prices reverberated through the US bond market on Wednesday, accompanied by indications that some Federal Reserve officials are hesitant to lower interest rates in the near future. However, substantial profit announcements from Starbucks and other major corporations allowed the US stock market to remain stable amidst these developments.
The S&P 500 closed nearly flat, dipping less than 0.1% a day after retreating from its latest all-time high. The Dow Jones Industrial Average fell by 280 points, or 0.6%, while the Nasdaq composite inched up slightly, gaining less than 0.1%.
The oil market experienced more significant movement, with the price of Brent crude for July delivery surging 5.8% to settle at USD 110.44 per barrel. This segment saw intense trading, with prices reaching as high as USD 111.84 later in the day.
The peak price since the onset of tensions with Iran was USD 119.50 for the most actively traded Brent contract, which was achieved last month. On Wednesday, the price for a barrel of Brent crude for June delivery briefly exceeded that threshold, climbing above USD 120.
The increase in oil prices this week comes as President Donald Trump appears inclined to maintain the US blockade of Iranian vessels, thwarting Iran’s ability to profit from oil sales. In retaliation, Iran is reportedly keeping the Strait of Hormuz closed to other oil tankers hoping to transport crude to global markets as long as the blockade remains in effect.
The surge in oil prices influenced the Federal Reserve’s decision on Wednesday to refrain from cutting interest rates. While a reduction could provide an economic boost, it also poses the risk of exacerbating inflation.
Three Federal Reserve officials expressed reluctance to signal any potential future rate cuts in the central bank’s announcement regarding their decision.
In response, Treasury yields rose in the bond market after the announcement, adding to earlier gains driven by the spike in oil prices. The yield on the 10-year Treasury increased to 4.41% from 4.36% at the end of Tuesday, while the two-year Treasury yield, which closely aligns with expectations for Fed actions, rose more sharply to 3.93% from 3.84%.
Traders predominantly anticipate that the Fed will maintain the federal funds rate at current levels through the end of the year, according to CME Group data. However, nearly all bets for a rate cut in 2026 have been eliminated in favor of a slim possibility of a rate hike.
Despite the overall market pressure, the US stock market remained close to its records, bolstered by companies reporting stronger-than-expected profit growth for early 2026.
Visa shares surged 8.3% following results that exceeded analyst expectations, with CEO Ryan McInerney indicating that consumer spending remains robust this quarter. Starbucks stock climbed 8.4% after similarly reporting better-than-expected results, citing increased customer spending at its North American outlets.
Conversely, companies that failed to meet expectations saw sharp declines. GE Healthcare Technologies dropped 13.2% after falling short of analyst forecasts, and Robinhood Markets sank 13.2% after reporting weaker-than-expected profit growth.
Booking Holdings fluctuated between gains and losses before finishing up 0.3%, reporting results that surpassed expectations but noted that the ongoing conflict with Iran has impacted its business, preventing some potential customers from making reservations during the quarter. The company, which owns Booking.com and Priceline, expects the conflict to continue affecting operations through the end of June, potentially impacting travel between the Middle East and major transit routes between Europe and Asia.
In summary, the S&P 500 fell 2.85 points to 7,135.95, the Dow Jones Industrial Average decreased by 280.12 to 48,861.81, and the Nasdaq composite added 9.44 to 24,673.24.
Internationally, European indexes declined following a stronger close in Asia, where Hong Kong’s Hang Seng index rose by 1.7%, contrasting with a 1.2% drop in London’s FTSE 100.
