Oil Prices Soar on Middle East Tensions as Fed Decision Looms

Oil prices surged by 5.6% on Wednesday to $86.64 per barrel as fighting resumed in the war between Iran and the US, raising concerns about global oil supply. The sharp increase came after Iran launched a barrage of missiles at American forces in the Middle East, while the US military partnered with Saudi Arabia to strike Tehran-backed militias in Iraq.

The price swings have raised worries that inflation could reaccelerate, just as it had begun to slow more than economists expected. This uncertainty has traders uncertain about what the Federal Reserve will announce after its two-day meeting on interest rates concludes later in the day.

Traders are betting on a roughly 36% probability that the Fed will raise its main interest rate, which would be the first increase in three years. Higher rates can keep a lid on inflation, but they can also slow the economy and undercut prices for stocks and other investments.