NEW YORK (AP) — U.S. stocks are drifting lower Wednesday after another rise in oil prices raised worries about inflation, which may have been primed to worsen even before the war with Iran began.
The S&P 500 slipped 0.3% and was on track for its first loss this week. The Dow Jones Industrial Average was down 180 points, or 0.4%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.3% lower.
Stocks fell under the pressure of a 2.2% climb for
the price of a barrel of benchmark U.S. crude to $97.69. Brent crude, the international standard, rose 4.2% to $107.69 per barrel.
Oil and natural gas prices have been spiking since the war began because of disruptions to the production and transportation of energy in the Persian Gulf. Qatar on Wednesday blamed Israel for an attack on an offshore natural gas field it shares with Iran.
If the disruptions keep oil and gas prices very high for very long, they could send a debilitating wave of inflation crashing into the global economy.
A report released Wednesday morning showed that inflation pressures were already worsening before the war began. It said inflation at the U.S. wholesale level unexpectedly accelerated last month to 3.4%, and those cost increases could hit U.S. households if producers pass them all along.
Such numbers strengthened Wall Street’s virtual consensus that the Federal Reserve will announce that it’s keeping interest rates steady this afternoon following its latest meeting, instead of resuming its cuts.
Cuts would give the job market and investment prices a boost, and President Donald Trump has been angrily calling for them. But lower interest rates would also worsen inflation.
More important for Wall Street is whether Fed officials will say they still think one cut to rates may be possible over the course of 2026. That’s what the median member said in December, the last time Fed officials published such expectations.
The Iran war has made it particularly difficult for anyone to make economic forecasts. Gasoline prices are soaring and will push up inflation for at least the next month or two. The average price for a gallon of gasoline spiked again overnight, reaching $3.84. A gallon of gasoline was well under $3 last month.
Global oil flows remain largely constrained, ING Bank analysts Warren Patterson and Ewa Manthey wrote in a research note on Wednesday, even as hopes were growing that Iran might be allowing more vessels through the Strait of Hormuz, a key waterway for global oil and gas transport.
Roughly a fifth of the world’s crude oil passes through the strait, which has been largely closed as Iran blocks ships linked to the U.S., Israel and their allies.
On Wall Street, some mixed profit reports helped keep the market in check.
Macy’s jumped 4.7% after reporting stronger profit and revenue for the latest quarter than analysts expected. The retailer behind Bloomingdale’s and Bluemercury is in the midst of a turnaround plan to drive growth under CEO Tony Spring.
But General Mills slipped 1.6% after the company behind the Pillsbury, Progresso and Wheaties brands reported a weaker profit for the latest quarter than analysts expected. CEO Jeff Harmening is investing in its brands in hopes of driving growth, and it’s sticking with its forecast for profit over the full fiscal year.
In the bond market, Treasury yields ticked higher following the higher-than-expected update on inflation at the wholesale level. The yield on the 10-year Treasury rose to 4.22% from 4.20% late Tuesday and from just 3.97% before the war with Iran started.
In stock markets abroad, indexes were mixed in Europe following a stronger finish in Asia. They reacted to the rise in the price of crude, which accelerated as trading headed westward around the world.
Tokyo’s Nikkei 225 rallied 2.9% after the government reported exports in February were higher than expected. South Korea’s Kospi leaped 5%.
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AP Business Writers Chan Ho-him and Matt Ott contributed.
