Fed Meets as Iran War, Oil Surge Cloud Rate Cut Outlook
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- Federal Reserve policymakers convene for their first meeting since the U.S. and Israel began air strikes on Iran about two weeks ago, with the energy shock's effect on inflation and growth now central to deliberations.
- U.S. crude oil surged close to $120 a barrel at the start of the week before easing toward $100, while Iran warned the world should be ready for $200 oil as its forces struck merchant ships during the week.
- S&P 500 was down over 4% from its late January record high as of Thursday, on course for its third straight weekly decline, with traders fixated on oil-driven volatility.
- Fed fund futures were pricing in roughly one quarter-point cut by December, down from two such cuts as of late February before the war began, according to LSEG data.
- Fed Chair Jerome Powell will hold his second-to-last meeting before his term expires in May, with Trump's nominee Kevin Warsh expected to succeed him at the central bank's helm.
- Nvidia's annual developer conference in the coming week could revive focus on the AI trade, though investors expect Iran headlines to keep driving market moves.
Why it matters: Rate-cut expectations were a core pillar of bullish equity sentiment this year, and the Iran-driven oil surge has already halved the number of cuts traders expect by December. With Powell exiting in May and Kevin Warsh waiting in the wings, the Fed's updated projections and Wednesday's press conference will signal whether $100-plus crude tips the central bank toward a prolonged hold — directly shaping borrowing costs, stock multiples, and energy-exposed sectors.
