Stocks climb as oil retreats, Fed calms inflation fears

On Thursday, September 17, US stock markets surged following the Federal Reserve's decision to raise interest rates, despite President Donald Trump's calls for lower rates. Investors seized on the Fed's stance that inflation remained "too high" for "too long," with Federal Reserve Chairman Kevin Warsh emphasizing the need for continued inflation fighting.

The unanimous decision to raise borrowing costs for the first time since 2023 reassured investors, bringing the 10-year US Treasury bond yield below the five percent threshold.

Oil prices also played a role in the market rally. The sharp decline in oil prices early in the day, triggered by the disruption of Saudi Arabia's East-West pipeline, initially sent oil futures down one percent to US$104.82 per barrel. However, Brent oil futures managed to recover partially, ending the day at a similar level.

The optimism surrounding the Fed's decision was further bolstered by the possibility of Saudi Arabia restoring a significant portion of its crude output, which had been disrupted by Houthi rebels in Yemen. Analysts noted that with no clear signals from either the US or Iran to de-escalate the situation, the assumption of a temporary disruption becoming permanent was becoming increasingly difficult to maintain.