By Hannah Erin Lang
The vibes in the stock market aren't getting much better.
Major U.S. indexes fell Thursday, with investors slashing their expectations that the Federal Reserve will cut interest rates this year. A fresh round of attacks on Middle Eastern oil-and-gas facilities also stoked fears that disruption in the energy markets could escalate, fueling global inflation.
Indexes slid in early trading before paring losses in the afternoon. The Dow industrials dropped 0.4%, or 204 points, while the Nasdaq composite and S&P 500 shed 0.3%. The blue-chip industrial average now stands about 8% below its all-time high in February.
"Everybody has tons of questions," said Cullen Rogers, chief investment officer at Wedbush Fund Advisers. "That does not lead people to be very comfortable about their portfolios."
Oil prices climbed early in the trading session after strikes on Persian Gulf oil-and-gas infrastructure. But futures pared gains after comments from President Trump and Israeli Prime Minister Benjamin Netanyahu raised hopes for a swifter end to the war. Brent crude, the international benchmark for oil, briefly touched $119 a barrel but later settled at $108.65.
Investors remain worried that higher energy costs could spark broader price hikes and ultimately drag on global economic growth. On Thursday afternoon, interest-rate futures showed investors saw a roughly 73% chance that the Fed doesn't cut rates at all this year, according to CME FedWatch. That was up from 48% the afternoon prior and 4% before the war began.
The Fed opted to leave rates unchanged Wednesday, in a move widely anticipated by Wall Street. But Chair Jerome Powell struck a hawkish tone at a news conference, stating that the central bank was in "a difficult situation" and highlighting inflation risks.
"That added to this already-lingering discomfort," said Mark Malek, chief investment officer at Siebert Financial.
Two-year Treasury yields -- which tend to rise and fall with expectations for short-term rates set by the Fed -- climbed for the second straight session to 3.830% on Thursday. That was the highest level since last July.
The outlook for global interest-rate cuts also dimmed, with the European Central Bank and its counterparts in the U.K., Switzerland and Sweden all leaving rates unchanged Thursday.
Gold prices tumbled 5.9%. Traders tend to ditch the precious metal when rates are higher, flocking to other assets, such as bonds, that can offer a higher return. Gold has more than doubled in value in less than two years, with individual investors crowding into the trade in recent months.
The top questions on investors' minds is how long the war with Iran will last -- and how severely it will affect prices as a result. But given the sizable threat to the global economy, Malek noted that stocks' reaction has been relatively muted so far.
"I think the market has factored in the worst case scenario already," he said. "It could be far worse considering the headlines."
Write to Hannah Erin Lang at hannaherin.lang@wsj.com
(END) Dow Jones Newswires
March 19, 2026 16:57 ET (20:57 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
