Wall Street slides as oil surge ignites stagflation fears
Brent crude briefly hits $119 as Middle East tensions escalate, gold and miners plunge to 2008 lows
Wall Street stocks plunged on Thursday as surging crude prices and hawkish Federal Reserve commentary reignited fears of stagflation, with gold mining stocks suffering their steepest decline since the 2008 financial crisis.
Brent crude briefly topped $119 per barrel before pulling back to around $111, while West Texas Intermediate crossed $99 a barrel—marking a 54% surge over the past month. The spike follows escalating geopolitical tensions after US and Israeli strikes on Iran's South Pars gas field and Iranian retaliation against Qatar LNG infrastructure, effectively disrupting operations through the Strait of Hormuz.
The energy shock comes just a day after the Federal Reserve held interest rates steady at 3.5% to 3.75%, but updated projections showing inflation running hotter than previously anticipated. Federal Reserve Chair Jerome Powell cited the Middle East conflict as a significant source of uncertainty, warning of potential implications for energy prices and inflation.
Central bank officials now project overall Personal Consumption Expenditures inflation to reach 2.7% by year-end, up from 2.4% forecast in December. The Fed still anticipates one quarter-point rate cut in 2026, while slightly upgrading economic growth expectations to 2.4%.
The prospect of persistent inflation amid slowing growth hammered cyclical sectors. The S&P 500 slid in afternoon trading as investors rotated into defensive positions. Treasury yields climbed, reflecting the higher inflation path.
Gold and copper futures joined a broad commodities sell-off, with SPDR Gold shares dropping after the Fed's decision. Mining stocks were among the hardest hit, with Newmont and Freeport-McMoRan both sliding sharply as rising fuel costs squeeze margins in an environment of falling metal prices.
"Copper joins gold in broad commodities sell-off. There's a worrying reason behind it," as CNBC reported, noting that rising oil prices increase both inflation and growth concerns simultaneously—a classic stagflation scenario.
Energy stocks surged on the oil spike, with Venture Global rallying on Qatar supply disruptions and rising European gas prices. However, the broader market struggled with the implications of sustained high energy costs for corporate profits and consumer spending.
Investors now face a difficult environment where monetary policy options are constrained by external energy shocks beyond the Fed's control. With the critical Strait of Hormuz supply route disrupted and inflation projections elevated, markets are pricing in a prolonged period of economic uncertainty.