Oil rises, stocks dip with Iran, earnings and Fed in focus

NEW YORK/ PARIS — MSCI's global equities gauge fell on Wednesday as oil prices rallied on worries about prolonged disruption in the Middle East while investors were also cautious ahead of financial releases from US megacap technology firms and a Federal Reserve policy update.

Oil prices climbed after a Wall Street Journal report cited US officials saying President Donald Trump instructed aides to prepare for an extended blockade of Iran.

US crude rose 5.22% to $105.15 a barrel and Brent  rose to $117.16 per barrel, up 5.3% on the day with little sign of a resolution two months into the US-Israeli war on Iran, which has snarled energy supplies through the crucial Strait of Hormuz. Trump said he was unhappy with Iran's latest proposal. In a social media post, he urged Iran to sign a deal.

Meanwhile, investors were waiting for earnings reports from market heavyweights Microsoft, Alphabet, Amazon and Meta, due later in the session.

On Wall Street, trading in the S&P 500 was choppy on Wednesday while the benchmark's technology sector was attempting a small gain after it pulled back sharply from a record high in the previous session following a report that artificial intelligence company OpenAI had missed internal targets.

"The S&P 500 is roughly at the level where it was before the war. The easy part of buying back the dip from oversold conditions is over. Now the market has to deal with the reality, which is probably a very long stand-off with Iran," said Irene Tunkel, chief strategist and founder of Belsize Park Investment Research.

Cross current

But despite geopolitical uncertainties, Tunkel noted that investors have been encouraged by the first-quarter earnings season.

"We have a cross-current," she said. "On the one hand, we have a conflict. On the other hand, earnings that have been rolling in so far have been quite good. Guidance has been quite positive."

On Wall Street at 10:58 a.m. ET (1458 GMT) the Dow Jones Industrial Average .DJI was down 247.45 points, or 0.50%, at 48,894.48, the S&P 500 was flat at 7,138.70 and the Nasdaq Composite had gained 33.38 points, or 0.14%, to 24,699.18.

MSCI's gauge of stocks across the globe fell 1.30 points, or 0.12%, to 1,067.68.

The pan-European STOXX 600 index fell 0.61%.

Federal Reserve

US Treasury yields rose as escalating Iran tensions stoked concerns about elevated energy costs ahead of the Fed's rate decision later in the day.

Traders have been betting that policymakers will keep rates unchanged but investors will watch for Fed commentary on the economic impact of the Iran war after the central bank's April meeting, which is expected to be the last with Jerome Powell at the helm.

Kevin Warsh, Trump's pick to lead the Fed, cleared a key procedural hurdle on Wednesday, opening the way for him to succeed Powell in coming weeks amid the White House's unprecedented efforts to exert control over the world's most powerful central bank.

The yield on benchmark US 10-year notes rose 4.4 basis points to 4.398% from 4.354% late on Tuesday, while the 30-year bond yield rose 3.5 basis points to 4.979% from 4.944% late on Tuesday.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 4.9 basis points to 3.893% from 3.844% late on Tuesday.

In currencies, the dollar index hit its highest level against Japan's yen JPY= since March 30 and was up 0.3% at 160.09 yen.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.17% to 98.76, with the euro down 0.1% at $1.1699. Sterling weakened 0.11% to $1.3501.

In precious metals, gold was on track for its third straight day of declines after hitting its lowest level since March 31. Spot gold fell 1.25% to $4,537.55 an ounce. — Reuters