Iran just launched missiles at a U.S. base in Jordan, pushing oil above 90 dollars a barrel. Here is what it means for oil stocks and the Fed.
Oil prices jumped back above 90 dollars a barrel after Iran just launched missiles at United States forces in the Middle East on a Wednesday morning, shattering a fragile ceasefire and prompting President Trump to promise a forceful response. "We'll be hitting them hard. They're going to get a beating," Trump told Fox News.
Iran Just Launched Missiles: What Happened and Why It Matters for Markets
The strike targeted a U.S. military base in Jordan using ballistic missiles, according to reports of the attack. It came just days after Brent Crude futures had briefly topped 100 dollars a barrel following the breakdown of an earlier U.S. Iran ceasefire. Prices had since cooled, with Brent sliding to a two week low of 84.09 dollars on Tuesday as Washington paused its bombing campaign to reconsider strategy. The renewed attack erased that dip almost overnight and pushed traders back into risk off mode, with oil once again the clearest barometer of how deep the crisis runs.
Stocks and Oil Have Been Moving in Opposite Directions
Since fighting in Iran began on February 28, the S&P 500 and oil prices have largely told two different stories. The index slid through February and March as oil climbed, bottoming out for the year in late March just before Brent spot prices peaked above 125 dollars a barrel in early April. Then the pattern flipped: as oil eased from April into June, the S&P 500 rallied to fresh record highs. The latest spike in oil has now knocked the index down 2.6 percent.
Shares of American oil producers such as Chevron and Devon Energy have tended to track crude prices rather than the broader market, rising when oil rises and falling when it falls. That makes sense, since most of their production sits far from the fighting or from any disruption to the Strait of Hormuz. They capture the benefit of higher global prices without absorbing the direct hit from supply shocks. This latest surge looks likely to lift those stocks again in the short run, but the longer term picture is murkier.
The Federal Reserve's Timing Problem
The missile strike landed just hours before the Federal Reserve's July Open Markets Committee meeting, where officials set the benchmark interest rate. The Fed ultimately held rates steady, but the vote was not unanimous: it passed 9 to 3. Several policymakers have already flagged worries about how the conflict is feeding into inflation. Cleveland Fed president Beth Hammack wrote on LinkedIn that
