Oil soars, stocks dip on Iran worries, earnings in focus after Fed

NEW YORK/PARIS, April 29 (Reuters) – Oil prices soared on worries about prolonged supply disruption due to the Middle East war while Wall Street equities pared earlier losses in choppy trading after a divided Federal Reserve kept rates steady and investors looked cautiously ahead to financial releases from U.S. megacap technology firms.

U.S. crude settled up 6.95%, or $6.95, at $106.88 a barrel while Brent settled up 6.08%, or $6.77, at $118.03 after earlier touching its highest point since June 2022, with little sign of a resolution two months into the U.S.-Israeli war against Iran, which has snarled energy supplies through the Strait of Hormuz.

A White House official said on Wednesday that U.S. President Donald Trump had asked U.S. oil companies about ways to mitigate the impact of a potentially months-long U.S. blockade of Iranian ports. Meanwhile, in the first official estimate of the military price tag for the Iran conflict, a senior Pentagon official said on Wednesday that the war has cost $25 billion so far.

The S&P 500 was close to flat after the Fed noted rising concerns about inflation while it drew three dissents from officials who no longer feel the U.S. central bank should communicate a bias towards lowering borrowing costs in its most divided decision since 1992. A fourth dissent at the meeting came in favor of a 25-basis-point rate cut.

Trump nominee Kevin Warsh is expected to replace Jerome Powell as chair in coming weeks amid the White House’s unprecedented efforts to exert control over the world’s most powerful central bank.

Chris Grisanti, chief market strategist at Mai Capital Management, said he saw the dissents as a “shot across the bow to incoming Fed Chair Kevin Warsh, who has been a proponent of easing.”

“They dissented not to the rate decision, but to easing bias in the statement. This serves two purposes: On its face, it’s more hawkish, and it says we may not be leaning towards easing anymore, so that’s new news,” Grisanti said.

Powell said in a press conference that despite dissenting votes against holding onto an interest rate easing bias, he does not believe officials are leaning toward hiking interest rates.

U.S. equity indexes were already choppy before the meeting as investors waited for earnings reports from market heavyweights Microsoft, Alphabet, Amazon, and Meta, due later in the day.

On Wall Street at 3:07 p.m., the Dow Jones Industrial Average fell 326.44 points, or 0.66%, to 48,816.71, the S&P 500 fell 12.36 points, or 0.17%, to 7,126.36 and the Nasdaq Composite fell 27.29 points, or 0.12%, to 24,635.17.

MSCI’s gauge of stocks across the globe fell 3.35 points, or 0.31%, to 1,065.63.

Earlier, the pan-European STOXX 600 index closed down 0.6% with mixed corporate results and data pointing to the economic damage caused by the Iran war.

BOND YIELDS, DOLLAR RISE

U.S. Treasury yields were higher after the Fed’s update.

The yield on benchmark U.S. 10-year notes rose 5.6 basis points to 4.408%, from 4.354% late on Tuesday while the 30-year bond yield rose 3.7 basis points to 4.9813%.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 8.2 basis points to 3.926%.

In foreign exchange markets, the dollar rose against major currencies after the Fed’s update while markets were also on edge over the U.S.-Israel war with Iran.

The dollar strengthened 0.47% to 160.36 Japanese yen, putting it closer to levels that have previously triggered intervention, despite the Bank of Japan signaling after its policy meeting on Tuesday that it could raise rates in coming months.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.4% to 98.98, with the euro down 0.36% at $1.1669.

In precious metals, gold was on track for its third straight day of declines after hitting its lowest level since March 31. Spot gold fell 1.19% to $4,539.85 an ounce.

(Reporting by Sinéad Carew, Laura Matthews, Elizabeth Howcroft, Gregor Stuart Hunter. Editing by Hugh Lawson, Kirsten Donovan and Nick Zieminski)