The is likely to open higher in Wednesday’s trading session, March 18, as futures of the three key averages—the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite—are trading lower by 0.4%, 0.4%, and 0.3%, respectively, as crude oil prices stabilised following a sharp run-up, while investors’ awaiting the US Federal Reserve policy decision.
The S&P 500 has closed higher over the last two trading sessions, marking the first such instance since the start of the Iranian war.
Brent earlier in the day after rising to $105 in the previous session. Higher oil prices are boosting energy stocks, supporting the key indices to stay afloat.
Meanwhile, the dollar index, which tracks its performance against a basket of major currencies, has largely remained unchanged at 99.56 in today’s session.
The dollar had climbed above 100.3 on Friday, its highest level since mid-May 2025, and ended last week up 1.66%, marking its second consecutive weekly gain. So far this month, the dollar has strengthened by 2%, the biggest monthly gain since July 2025, when it rose 3.37%.
Fed expected to leave rates unchanged for a second time
The is due later in the day, where policymakers are widely expected to hold rates steady, with traders anticipating only one 25-basis-point cut, possibly in September.
Investors are assessing that higher crude oil, gas, and fertiliser prices, triggered by the ongoing war in the Middle East, could prompt the central bank to hold interest rates until late 2026.
Before pausing rate cuts in January, policymakers had reduced short-term interest rates three consecutive times, indicating that the impact of US President Donald Trump’s tariffs on the economy was limited.
However, the ongoing US-Iran war has led to a sharp rise in energy prices, making policymakers’ jobs more difficult, given an already soft labour market.
Oil price surge adds to inflation worries
Economists are forecasting that if the seizure of the Strait of Hormuz remains in place for more weeks, it could impact consumer spending, as more household income is spent on fuel, leaving less money for other goods and services, resulting in higher unemployment in the world’s largest economy.
Higher oil prices could also lead to increases in consumer goods prices, which may add further strain to consumer spending, the main growth engine for the US economy.
With crude oil prices running high, many economists expect the Fed will have to raise its inflation forecast to as high as 3% even by late 2026. An increase of that magnitude could be hard to reconcile with further interest rate cuts.
In the , most policymakers cautioned that progress toward the 2% inflation objective could be slower and more uneven than previously expected. They emphasised that inflation running persistently above target remains a key concern.
The US central bank has been battling to bring inflation down to its long-term 2% target since the pandemic, with prices remaining persistently high.
Meanwhile, the US job market is sputtering. Last month, employers cut 92,000 jobs. In 2025, they added fewer than 10,000 jobs a month, marking the weakest hiring outside recession years since 2002.
A combination of rising prices and higher unemployment is generally the worst-case scenario for central bankers.
On the economy front, the world’s largest economy has been resilient in the face of President Donald Trump’s import taxes and deportations. However, the US Commerce Department reported on March 13 that economic growth slowed sharply in the last three months of 2025 to 0.7%, half its initial estimate of fourth-quarter growth and down from a strong 4.4% expansion in the third quarter.
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