Powell Warns Oil Shock Could Test The Fed: These 7 Stocks Tumbled

Federal Reserve Chair Jerome Powell on Wednesday warned that the escalating Middle East conflict will push U.S. inflation higher in the near term — but ruled out stagflation and described the U.S. economy as resilient. Powell’s remarks came after the Federal Open Market Committee held the federal funds rate unchanged at 3.50%–3.75% for the third consecutive meeting, as widely expected. Middle East Crisis Front And Center “The implications of developments in the Middle East for the U.S. economy are uncertain,” Powell said in his opening statement. “In the near term, higher energy prices will push up overall inflation. It is too soon to know the scope and duration of the potential effects on the economy.” He highlighted the traditional central bank approach of “looking through” energy shocks, but conditioned that option on inflation expectations remaining anchored — a threshold he acknowledged is less comfortable given years of above-target inflation. “The question of looking through, when it does arise, will be one to approach not lightly, but in the context that inflation has been above target,” Powell said. He also highlighted the U.S.’s position as a net energy exporter, noting that higher oil prices would boost domestic drilling activity and corporate profits — providing some economic offset. Yet, he cautioned that “the net of the oil shock will still be some downward pressure on spending and employment and upward pressure on inflation.” Rate Path: Cuts Still In Play, Hike Not Off The Table The median SEP still projects the federal funds rate at 3.4% by the end of 2026 — implying roughly two quarter-point cuts — unchanged from December. But Powell noted that “a meaningful amount of movement toward fewer cuts” occurred among participants, with several officials shifting from two cuts to one. He confirmed that the possibility of a rate hike “did come up at the meeting,” though the vast majority of participants do not see it as their base case. Asked directly about stagflation, Powell firmly rejected the comparison. “I would reserve the term stagflation for a much more serious set of circumstances,” he said. “That is not the situation we’re in. What we have is some tension between the goals — we’re trying to manage our way through it.” Market Reactions U.S. equities extended session losses following the press conference, while oil pressed higher and gold tumbled on rising real yields. S&P 500 – as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY) – fell 1.0% to 6,647, near session lows Nasdaq 100 – as tracked by the Invesco QQQ Trust (NASDAQ:QQQ) – slipped 0.9% to 24,565 Dow Jones – as tracked by the SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA) – dropped 1.3% to 46,399 The 10-year Treasury yield rose 6 basis points to 4.26%, extending gains from 4.22% at midday as Powell’s comments reinforced a higher-for-longer inflation outlook Brent crude – as tracked by the United States Brent Oil Fund (NYSE:BNO) – gained 4.8% to $108.35, with WTI – as tracked by the United States Oil Fund (NYSE:USO) – adding 1.2% to $97.39 Natural gas – as tracked by the United States Natural Gas Fund (NYSE:UNG) – spiked 4.3% to $3.16. Gold – as tracked by the SPDR Gold Shares (NYSE:GLD) – fell 2.9% to $4,857, its worst session in two weeks, pressured by rising real yields These were the heaviest decliners among large-cap stocks in the last hour of trading, filtered to companies with a market cap above $10 billion, according to Benzinga Pro data. Name% ChangeHDFC Bank Ltd. (NYSE:HDB)-3.99%Williams-Sonoma Inc. (NYSE:WSM)-3.00%Western Digital Corp. (NASDAQ:WDC)-2.83%Akamai Technologies Inc. (NASDAQ:AKAM)-2.77%TTM Technologies Inc. (NASDAQ:TTMI)-2.55%Rocket Lab USA Inc. (NASDAQ:RKLB)-2.38%Nebius Group N.V. (NASDAQ:NBIS)-2.32% Photo: Domenico Fornas / Shutterstock.com