Wall St Week Ahead Investors await Fed rate outlook as Iran war keeps markets on edge

• Markets now price in only one quarter-point rate cut by December 2026, down from two cuts expected before the Iran war began in late February
• U.S. crude oil prices soared close to $120 per barrel this week, with Iran warning the world should prepare for $200 oil as it targets merchant ships
• The Fed is expected to hold rates steady while releasing updated economic projections; Chair Jerome Powell's press conference will be closely watched for guidance on how the conflict impacts policy outlook

Market Summary: Fed Meeting and Iran Conflict Dominate Investor Focus

Key Developments:

The U.S. Federal Reserve meets this week amid heightened uncertainty from the ongoing Iran conflict, which has significantly impacted market expectations for interest rate cuts. The central bank is widely expected to hold rates steady on Wednesday when it releases updated economic projections.

Market Impact:

• The S&P 500 has declined over 4% from its late-January record high, marking a third consecutive weekly decline
• U.S. crude oil prices surged near $120 per barrel before settling around $100; Iran warned prices could reach $200
• Fed fund futures now price in only one quarter-point rate cut by December, down from two cuts expected in late February before the war began
• Equity volatility has increased substantially since U.S. and Israeli air strikes on Iran began approximately two weeks ago

Fed Policy Outlook:

The central bank paused its easing cycle in January after cutting rates last year to support a weakening labor market. Surging energy prices threaten to reignite inflation pressures, keeping the Fed in a "holding pattern for longer," according to strategists. However, February's weak jobs report could encourage maintaining an easing bias.

Investors will closely watch Fed Chair Jerome Powell's Wednesday press conference for insights on how the conflict affects monetary policy. This is Powell's second-to-last meeting before his term expires in May, with Kevin Warsh expected to succeed him.

Additional Factors:

Nvidia's annual developer conference this week may refocus attention on artificial intelligence investments, though Iran-related headlines are expected to continue driving market volatility. Analysts note traders remain fixated on any developments regarding a U.S. exit strategy from the conflict.