WTI holds near daily low as Fed decision draws muted reaction

WTI oil prices hit near their lowest point on Wednesday, with the benchmark crude trading around $97.50 per barrel, down about 3.3% for the day. The Federal Reserve (Fed) raised its federal funds target range by 25 basis points to 3.75%-4.00%, with the median year-end rate expected at 4.1%. Despite this, oil prices remained relatively stable as the hike was already anticipated.

The Fed's decision and the resulting higher borrowing costs may dampen future energy demand. The market continues to monitor Middle East supply risks, which contribute to a significant geopolitical premium in oil prices. Shipping through the Strait of Hormuz is restricted, and security concerns in the Red Sea and Bab el-Mandeb Strait add to the uncertainty.

However, a positive supply-side development helped drive oil prices lower. Saudi Aramco is reportedly working to partially restore its East-West pipeline within days following a drone attack earlier in the week. This pipeline allows Saudi oil exports to circumvent the Strait of Hormuz. The US Dollar showed strength against several major currencies, including the British Pound, being the strongest performer.

Meanwhile, the Australian Dollar (AUD) held a negative bias for the third consecutive day, defending a 0.7100 level while trading close to a monthly low in Wednesday's Asian session. The US Dollar remained near a two-week high due to the expected Fed rate hike and oil-induced inflation concerns, driving up US bond yields to multi-year highs.

Additionally, rising tensions in the Middle East bolstered the safe-haven USD, weighing on risk-sensitive currencies like the Australian Dollar. Gold briefly surpassed $4,360 before erasing earlier gains and sliding below $4,300 following the Fed's anticipated rate hike.