Oil spikes while stocks slip ahead of US Fed rate decision

Oil prices shot higher Wednesday on concerns of an extended blockade of the Strait of Hormuz, while Wall Street stocks mostly slid as investors awaited a US Fed rate decision and a slew of tech firm earnings. Both main oil contracts jumped nearly six per cent after President Donald Trump warned Tehran on Wednesday that it should “get smart soon” and capitulate to Washington’s demands for tight controls on its nuclear programme, as a US naval blockade turned the screws on Iran’s economy. Meanwhile, the United States could extend its naval blockade of Iran for months more, oil executives were told in a meeting with Trump, an administration official said. Analysts warned that such a move would prompt Iran to maintain its own blockade of the Strait of Hormuz, leaving the vital oil shipping route at a near standstill. The US Federal Reserve is widely expected to keep interest rates unchanged later in the day, with markets closely watching its guidance on inflation as energy costs soar. The dollar drifted higher against its main peers. “The longer the conflict persists and the Strait of Hormuz remains disrupted, the more pronounced the inflationary pressures are likely to become,” said Anna Macdonald, investment strategy director at Hargreaves Lansdown. International benchmark oil contract Brent crude for June delivery rose to $117.81 a barrel, its highest level since the fragile ceasefire between the US and Iran came into effect. “The market is increasingly shifting towards a view that no longer expects a quick and lasting peace, nor an immediate reopening of the Strait of Hormuz,” said Arne Lohmann Rasmussen, chief analyst at Global Risk Management. Kathleen Brooks, research director at trading platform XTB, warned: “This is a new phase of the war in Iran, and we could now see oil prices go back to the March highs around $120 per barrel for Brent.” With talks to end the Middle East war appearing to be at a standstill, investors’ attention turned to earnings updates. Wal