High oil prices knock down stocks and erase Wall Street's hopes for a
cut to interest rates
[March 21, 2026] By
STAN CHOE
NEW YORK (AP) — Another climb for oil prices shook stock markets on
Friday, as hopes collapsed for a possible cut to interest rates this
year by the Federal Reserve.
The S&P 500 fell 1.5% to close its fourth straight losing week, its
longest such streak in a year. The Dow Jones Industrial Average dropped
443 points, or 1%, and the Nasdaq composite tumbled 2%.
The market’s losses deepened after oil prices erased an early dip and
accelerated in the afternoon. Brent crude, the international standard,
rose 3.3% to settle at $112.19 per barrel. Benchmark U.S. crude gained
2.3% to $98.32 per barrel.
Stocks also bent under the weight of leaping yields in the bond market.
Higher yields make mortgage rates and other borrowing more expensive for
U.S. households and companies, slowing the economy, and they grind down
on prices for all kinds of investments. Treasury yields have been
jumping on worries the war with Iran will cause a long-term spike in oil
and natural gas prices that drives up inflation.
Worries have gotten so high that traders have canceled nearly all their
bets that the Federal Reserve could cut interest rates this year,
according to data from CME Group. Some even think the Fed could raise
rates in 2026, a nearly unthinkable scenario before the war began.
“I think it would be market shaking,” Ann Miletti, head of equity
investments at Allspring Global Investments, said about a rate hike. But
she also said that if oil prices stay high for a long time, they would
likely drag so much on the economy that the Fed would not raise rates.
Lower interest rates would give the economy and investment prices a
boost, and they’re something President Donald Trump has angrily been
calling for. Before the war, traders were betting heavily that the Fed
would cut rates at least twice this year.
But lower rates risk worsening inflation. And investors now see little
room for central banks worldwide to cut interest rates to help their
economies. Besides the Federal Reserve, central banks in Europe, Japan
and the United Kingdom also held their interest rates steady this past
week.
The price of Brent crude has zigzagged sharply on its way from roughly
$70 per barrel before the war began to as high as $119.50 this week. Big
swings have struck hour to hour as financial markets try to handicap how
long the war will last and how much damage it will do to oil and gas
production in the Persian Gulf.
The U.S. stock market has a history of bouncing back relatively quickly
from past conflicts in the Middle East and elsewhere, as long as oil
prices don’t stay too high for too long. Oil prices aren’t at a red-flag
point yet, Miletti said, but “we’re getting close if the duration is
long enough.”
“If three months from now, we’re in a similar situation, not only myself
but a lot of other investors will be much more cautious,” she said.
While companies can adjust to gradual rises in oil prices, Miletti said
they’re less able to quickly change their business models after a sudden
spike becomes a new normal.
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Traders work on the floor at the New York Stock Exchange in New
York, Thursday, March 19, 2026. (AP Photo/Seth Wenig)
 On Wall Street, Super Micro Computer
lost a third of its value and tumbled 33.3% to help drag the U.S.
stock market lower. The U.S. government accused a senior vice
president of the company and two others affiliated with it of
conspiring to smuggle billions of dollars of computer servers
containing advanced Nvidia chips to China.
The company said it has been cooperating with the investigation and
is not a defendant in the indictment. It placed its two accused
employees on administrative leave and terminated its relationship
with an accused contractor.
Roughly three out of every four stocks in the S&P 500 fell. Stocks
of smaller companies, which can feel the pinch of higher interest
rates more than their bigger rivals, led the way lower. The Russell
2000 index of smaller stocks fell a market-leading 2.3%.
Among the few winners was FedEx, which rose 0.8% after delivering a
much stronger profit for the latest quarter than analysts expected.
All told, the S&P 500 fell 100.01 points to 6,506.48. The Dow Jones
Industrial Average dropped 443.96 to 45,577.47, and the Nasdaq
composite sank 443.08 to 21,647.61.
In the bond market, the yield on the 10-year Treasury jumped to
4.38% from 4.25% late Thursday and from just 3.97% before the war
started. That’s a significant move for the bond market.
The two-year Treasury yield, which more closely tracks expectations
for what the Fed will do, leaped to 3.88% from 3.79% late Thursday
and is near its highest level since the summer.
When bonds are paying more in interest, they make other investments
less attractive in comparison. That’s particularly the case for
things like gold, which pay their investors nothing at all. Gold’s
price finished the week at $4,574.90 per ounce, hurting its
reputation as a safe place for money during uncertain times. Earlier
this year, gold was setting records and briefly topped $5,400 per
ounce.
Outside of Wall Street, stock indexes fell sharply in Europe
following their wipeouts on Thursday. Indexes also sank in China,
though South Korea’s Kospi added 0.3%.
___
AP Business Writers Chan Ho-him and Matt Ott contributed.
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