Most stocks increase as the Fed raises rates and oil prices fall

September 17, 2026

Market Reactions Following Federal Reserve Rate Hike

On Thursday, most stock markets experienced an upswing after the Federal Reserve raised interest rates for the first time in three years. Fed Chair Kevin Warsh’s remarks hinted that additional hikes may be on the way as officials strive to combat rising inflation.

Investor optimism was further buoyed by a significant drop in oil prices. This decline was primarily tied to expectations of increased supply, particularly after Saudi Arabia announced its intent to restore some pipeline capacity that had been shut down due to drone attacks over the weekend.

The Fed’s decision, made unanimously, marked the first borrowing cost increase since 2023, going against former President Donald Trump’s calls for cuts. Warsh emphasized the necessity of addressing inflation, which he characterized as “too high” for “too long.”

“We took a step towards removing accommodative measures so that financial and credit conditions align more closely with our ultimate goals,” Warsh stated following the announcement. He added that this action exemplifies the Fed’s seriousness about achieving price stability.

A graph shared during the meeting indicated that most Fed policymakers foresee at least one further rate increase before the year concludes. Traders now assign an equal chance to an October hike.

While Wall Street’s three primary indexes posted losses on Wednesday, Asian traders reacted more positively to the quarter-point increase, with analysts appreciating the restoration of credibility to the central bank and reaffirmation of its commitment to curbing inflation.

Long-term government bond yields, which recently reached their highest levels in two decades, saw a decline as investors moderated their inflation expectations, currently at 3.4 percent—significantly above the Fed’s two percent target.

Stephen Innes from Quintex Intel remarked, “The wording about removing accommodative measures indicates the central bank does not believe its job is finished.” He suggested that this indicates that policy was still supportive before Wednesday’s increase and may not be restrictive enough yet.

Innes also noted, “The increase has alleviated immediate concerns about credibility. However, it has also raised new questions about how much further tightening is needed.” Christian Scherrmann from DWS pointed out that the Fed’s focus on maintaining credibility, particularly in light of bond market conditions and movements in oil prices, was likely a significant factor in this decision.

Interestingly, despite Warsh’s hawkish outlook, some may find comfort in his generally optimistic view of the economy. Janus Henderson analyst Daniel Siluk highlighted that without timely action, the Fed risks damaging its credibility, which could unsettle inflation expectations and lead to major risk adjustments in financial markets.

Equity markets in Asia and Europe were predominantly positive on Thursday. Markets in Tokyo, Sydney, Singapore, Taipei, Wellington, Mumbai, Bangkok, and Jakarta all reported gains, as did those in London, Paris, and Frankfurt. Conversely, the Hong Kong and Shanghai markets saw slight declines, while Seoul remained unchanged.

However, Tai Hui of JP Morgan Asset Management cautioned that the likelihood of U.S. policy rates exceeding five percent appears limited. He added that factors that could drive a continuation of the equity bull market, such as lower interest rates, do not seem probable in the near term.

President Trump expressed frustration over the rate hike, describing Warsh as a “good man” who faced “a hostile board.” He suggested that the increase might be politically motivated to undermine his performance.

Meanwhile, the ongoing crisis in the Middle East continues to impact sentiment, with oil prices hovering above $100 per barrel. Nevertheless, reports that Saudi Arabia aims to restore approximately half of its cross-country oil pipeline capacity soon provided some relief to investors.

The East-West pipeline had been closed after a recent attack by Yemen’s Iran-backed Houthis. Saudi Aramco is looking to return to full operational capacity within about six weeks, according to sources cited by Bloomberg. This news contributed to a nearly three percent decline in crude prices on Wednesday, extending a further drop of more than one percent on Thursday.

The U.S. dollar retreated against other currencies after a spike on Wednesday following the Fed’s decision. Market attention is now shifting to upcoming announcements from the central banks of Britain and Japan, with the latter also expected to raise rates to manage inflation and a weakening yen.

– Key figures at around 0810 GMT –