San Francisco Frontiers - US stocks fall on latest oil price surge as Fed lifts inflation forecast

Brent oil futures rose over six percent at one point to nearly $110 a barrel after Iran vowed to hit energy facilities throughout the Gulf in retaliation to what it said was an Israeli attack on a facility serving a massive gas field it shares with Qatar.

The latest surge in crude prices -- which moderated later in Wednesday's session -- acted as an equity market anchor throughout Wall Street's trading day, with losses picking up after Federal Reserve Chair Jerome Powell said he expected higher energy prices to boost inflation in the near term.

Beyond lifting inflation in the short-run, Powell indicated that little was clear at this point.

"We're right at the beginning of this, and we don't know how big -- you just don't know how big this will be and how long it lasts," he said, adding the Fed would have to "wait and see."

In earlier discouraging news for equities, US wholesale inflation data for February rose more than expected.

Major US indices finished near session lows with the broad-based S&P 500 losing 1.4 percent.

"There's nothing to push the market up right now," said Interactive Brokers' Steve Sosnick. "You've got higher rates, you have a bad inflation report, you have a Fed that's not inclined to do much."

Earlier Wednesday, oil prices had fallen slightly after Iraq said it had resumed limited oil exports through the Turkish port of Ceyhan, using a pipeline that avoids the Strait of Hormuz.

The strategic waterway usually sees a fifth of global oil pass through it but Iran has effectively shut it since the outbreak of the war, with attacks on ships.

But oil prices jumped as Iran reacted furiously to an Israeli attack on the South Pars gas field.

"This will complicate the situation and could have uncontrollable consequences, the scope of which could engulf the entire world," President Masoud Pezeshkian wrote on X.

Qatar's Ras Laffan facility was later targeted in Iranian strikes, with QatarEnergy saying emergency teams had been "deployed immediately to contain the resulting fires.

In response, the Qatari foreign ministry ordered several Iranian diplomats to leave the country immediately.

John Kilduff of Again Capital described the South Pars attack as a "red line" for Iran.

"Just when you think this can't get much worse, it finds a way to do so," Kilduff said.

The White House unveiled new steps Wednesday to try to counter surging oil prices, waiving a century-old shipping law and easing Venezuela sanctions.

But these and other steps announced by importers "are simply not enough," Kilduff said. The market "needs a secured strait of Ormuz, so that navigation can be undertaken."

Markets are looking ahead to additional central bank meetings after the Fed.

On Thursday, the European Central Bank, the Bank of England and the Bank of Japan will all hold meetings.

While they were all expected to keep rates steady, the latest inflation reports could lead to more hawkish comments from the central bankers.

- Key figures at around 2130 GMT -

Brent North Sea Crude: UP 3.8 percent at $107.38 per barrel

West Texas Intermediate: UP 0.1 percent at $96.32 per barrel

New York - Dow: DOWN 1.6 percent at 46,225.15 (close)

New York - S&P 500: DOWN 1.4 percent at 6,624.70 (close)

New York - Nasdaq Composite: DOWN 1.5 percent at 22,152.42 (close)

London - FTSE 100: DOWN 0.9 percent at 10,305.29 (close)

Paris - CAC 40: DOWN 0.1 percent at 7,969.88 (close)

Frankfurt - DAX: DOWN 1.0 percent at 23,502.25 (close)

Tokyo - Nikkei 225: UP 2.9 percent at 55,239.40 (close)

Hong Kong - Hang Seng Index: UP 0.6 percent at 26,025.42 (close)

Shanghai - Composite: UP 0.3 percent at 4,062.98 (close)

Euro/dollar: DOWN at $1.1451 from $1.1505 on Tuesday

Pound/dollar: DOWN at $1.3256 from $1.3320

Dollar/yen: UP at 159.87 yen from 159.07 yen

Euro/pound: UP at 86.38 pence from 86.37 pence

burs-jmb/des

E.Cruz--SFF