Oil falls further on Mideast deal, but Fed outlook knocks equities

ByAmeliaJune 18, 20262 Mins read5

LONDON, June 18, 2026 (BSS/AFP) – Oil prices dropped further on Thursday after US President Donald Trump and his Iranian counterpart signed off on a deal to end four months of war and reopen the Strait of Hormuz to tanker and cargo traffic.

Wall Street was cautiously in the green around a half hour into trading, with the Dow, the broader-based S&P 500 and the tech-heavy Nasdaq up just above 0.5 percent.

That followed steep falls the previous session after the US Federal Reserve raised its inflation forecast and projected higher US interest rates this year, boosting the dollar.

“Politics and economics are front and centre for markets,” said Russ Mould, investment director at AJ Bell.

“The US and Iran have signed an initial deal to end the war, causing oil prices to fall further,” he said.

But the Fed’s hint at a rate increase “took the market by surprise and caused a wobble” on Wall Street and elsewhere, he added.

Kevin Warsh, the new Fed chief, has vowed to “deliver price stability” after chairing his first policy meeting, even though Trump has repeatedly called for lower rates.

“Persistently high prices are a burden for the American people,” he said after the meeting, which followed an interest rate hike by the European Central Bank last week.

“The thought of a hawkish Fed policy and higher interest rates weighs heavily on risk appetite,” said Ipek Ozkardeskaya, senior analyst at Swissquote.

For Fawad Razaqzada, market analyst with Forex.com, “the Fed is basically signalling a readiness to respond should inflationary pressures re-emerge”.

He added: “Should lower energy costs continue to filter through to inflation data, policy makers may ultimately find sufficient justification to keep rates unchanged for an extended period rather than resume tightening.”

Crude futures slid around two percent on Thursday after a deal aimed at ending the US-Israeli conflict with Iran that restricted shipping in the Strait of Hormuz, causing a spike in energy prices.

But “the latest ECB and Fed decisions showed that policy makers do not necessarily rely on the idea that lower oil prices will immediately cool inflationary pressures”, Ozkardeskaya said.

European markets failed to find momentum.

London’s benchmark FTSE 100 index was down nearly one percent mid-afternoon, with the Bank of England widely expected to keep its main interest rate on hold despite elevated inflation.

Frankfurt and Paris were essentially flat two hours out from the close.

Earlier in Asian trading, Seoul surged more than two percent and ploughed past 9,000 points for the first time thanks to a fresh surge in chip titans Samsung and SK Hynix as the AI boom continues apace.

Tokyo, meanwhile, finished above 71,000 points for the first time.

– Key figures around 1345 GMT –

Brent North Sea Crude: DOWN 1.5 percent at $78.02 a barrel

West Texas Intermediate: DOWN 2.2 percent at $74.56 a barrel

New York – Dow: UP 0.6 percent at 51,776.00 points

New York – S&P 500: UP 0.7 percent at 7,470.20

New York – Nasdaq: UP 0.7 percent at 26,197.14

London – FTSE 100: DOWN 1.0 percent at 10,397.30 points

Paris – CAC 40: UP 0.1 percent at 8,438.27

Frankfurt – DAX: FLAT at 24,933.76

Tokyo – Nikkei 225: UP 1.7 percent at 71,053.49 (close)

Hong Kong – Hang Seng Index: DOWN 1.6 percent at 23,924.81 (close)