Fed's Powell Calms Rate Hike Fears, But Oil Surge Drags Stocks Lower

Federal Reserve Chairman Jerome Powell delivered reassuring remarks at Harvard University on Monday, easing concerns about imminent interest rate hikes — but rising oil prices continued to weigh heavily on U.S. financial markets, pushing stocks and cryptocurrency lower by the close of trading.

Powell stated that the Fed is currently looking past short-term oil price volatility, emphasizing that inflation expectations remain "well anchored." His comments provided meaningful relief to a bond market that had recently begun pricing in a higher probability of near-term rate increases. Following his speech, the U.S. 10-year Treasury yield dropped nine basis points to 4.35%, while the 2-year yield fell eight basis points to 3.83%. The likelihood of one or more Fed rate hikes in 2026 sharply declined to just 5%, down from 25% the previous Friday, according to CME FedWatch data.

Despite an optimistic open, U.S. equities failed to hold their early gains. The Nasdaq finished the session down 0.75%, while the S&P 500 declined 0.4%. Bitcoin mirrored the trend, briefly rallying before retreating to approximately $66,500 — roughly flat over the prior 24-hour period.

The primary drag on investor sentiment was a sharp spike in crude oil prices. West Texas Intermediate crude surged 5.3% on Monday, approaching $105 per barrel. Although WTI has traded above the $100 threshold since the outbreak of the Iran conflict, this marked its first close above that level since 2022 — reigniting fears about sustained inflationary pressure across the broader economy.

Powell acknowledged the uncertainty surrounding the oil shock, noting that policymakers are not yet prepared to act decisively. "We will eventually maybe face the question of what to do here," he said, adding that the economic impact remains unclear.

Markets will continue monitoring both Fed communications and energy price movements as key drivers of near-term volatility.