Fed Chair Powell Dismisses Oil Price Surge — Impact on Markets and Crypto

Key Takeaways

• Jerome Powell confirmed the Federal Reserve will maintain current interest rates despite escalating oil prices
• Probability of a rate increase plummeted from 25% to 5% following Powell’s remarks at Harvard
• West Texas Intermediate crude surged 5.3% to approximately $105 per barrel, breaking the $100 threshold for the first time since 2022
• The Nasdaq Composite declined 0.75% while the S&P 500 shed 0.4% after initial morning gains
• Bitcoin pulled back to approximately $66,500, showing minimal movement over the previous 24-hour period

During a Monday address at Harvard University, Federal Reserve Chair Jerome Powell indicated the central bank intends to maintain its current interest rate posture, despite escalating crude oil prices driven by intensifying conflict in Iran.

Powell emphasized that inflation expectations remain “well anchored” when looking beyond immediate timeframes. While acknowledging potential future action may be necessary, he stressed it’s premature to fully assess the conflict’s economic ramifications.

Bond traders responded favorably to his statements. The benchmark 10-year Treasury yield decreased nine basis points to settle at 4.35%, while the 2-year yield dropped eight basis points to 3.83%.

Market expectations for monetary tightening shifted dramatically. CME FedWatch data showed the likelihood of a Fed rate hike in 2026 collapsed from 25% on Friday to merely 5% by Monday’s close.

However, equity markets failed to sustain their morning momentum. The Nasdaq Composite finished down 0.75% and the S&P 500 closed 0.4% lower. Semiconductor stocks contributed significantly to the broader decline.

Bitcoin similarly surrendered its earlier advances and stabilized around $66,500, essentially flat compared to the prior 24-hour trading session.

Crude Oil Continues Upward Trajectory

Energy prices remained the primary market headwind. West Texas Intermediate crude jumped 5.3% Monday to nearly $105 per barrel, representing the first close above the $100 level since 2022.

While oil has traded above $100 throughout the Iran conflict, Monday’s settlement established a significant benchmark. The ongoing hostilities have compromised a critical energy transportation corridor, driving sustained price increases.

President Trump utilized social media Monday to warn that failure by Iran to reopen the Strait of Hormuz could trigger U.S. military action against power generation facilities, petroleum infrastructure, and potentially water desalination plants.

Market analysts indicate daily conflict developments continue dominating trading sentiment. Evercore’s Krishna Guha noted attention has pivoted toward economic growth concerns stemming from persistently elevated oil prices.

“The probability of one or more cuts is much higher than the probability of a hike,” Guha stated.

Investor Uncertainty Persists

Wolfe Research’s Chris Senyek confirmed his firm maintains a cautious market positioning. He highlighted contradictory messaging from the Trump administration regarding both conflict escalation and potential de-escalation.

E*Trade from Morgan Stanley’s Chris Larkin suggested markets will find it challenging to move beyond current turbulence absent a definitive resolution to the conflict.

The fixed-income market is experiencing its worst monthly performance since 2024. Equities are trending toward their weakest monthly showing since 2022.

The administration continues threatening additional strikes against Iranian infrastructure as the conflict enters its fifth week with no resolution in sight.

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