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Dow slides ahead of Fed decision as Iran missile strikes raise risk

Oil rebounded toward $90.00 after a weekly inventory draw larger than the consensus, while futures kept the 3.50% to 3.75% target range as the base case.

Reported · Written up by our desk · Central Banks

The Dow Jones Industrial Average traded just above 51,800 on Wednesday afternoon, down about 900 points, as investors positioned for the Fed's decision. The index had earlier seen a session high just above 52,800 before giving way, and the move followed renewed pressure tied to events in the Middle East.

FXStreet said Iran launched multiple ballistic missiles at US forces late Tuesday, with Central Command stating that every missile was intercepted. The report also said a target was reported to be an American base in Jordan and that President Trump told an interviewer Washington will hit Iran hard in response, ending a four day pause that had supported risk assets earlier in the week.

Oil rose sharply, with West Texas Intermediate up almost 7% on the session to trade near $90.00, returning to levels it was at before the stand down. Separately, the US Energy Information Administration reported commercial crude oil stocks fell by 7.167 million barrels for the week, versus a consensus draw of 2.5 million, while a build of 2.011 million barrels was recorded the prior week.

Ahead of the Fed statement, futures priced a 66.3% chance the target range stays at 3.50% to 3.75% and a 33.7% chance of a hike. Further out, the probability of at least one hike rose to 80.6% by 16 September, 87.1% by 28 October, and 92.2% by 9 December, with two hikes priced at 60.3% by year end, according to FXStreet.

Latest closeWTI crude $81.23 ▼1.7%|Dow Jones 52,747.32 ▲1.0%

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