Just now, the entire market surged! The Federal Reserve is making a major move!

Great Counterattack!

Today, after the European stock markets opened, multiple countries’ stock indices surged collectively, with France, Italy, and Spain’s indexes rising over 1% at one point. U.S. stock futures also strengthened across the board. During today’s Asian trading session, Chinese A-shares and Japanese and Korean markets all closed higher, with South Korea’s KOSPI index soaring over 5%. Analysts pointed out that the slight decline in international oil prices today eased market concerns about supply disruptions in the energy sector. The VIX fear index also dropped more than 4% at one point.

Currently, global financial markets are focusing on the upcoming Federal Reserve interest rate decision and Chairman Powell’s speech. Market expectations suggest that, given the high uncertainty caused by the Middle East conflict, the likelihood of the Fed cutting rates is almost zero.

Full-scale rebound

On March 18, European markets opened higher across the board. As of the time of writing, Spain’s IBEX 35 rose over 1%, France’s CAC 40 increased 0.9%, Italy’s FTSE MIB gained 0.72%, the Euro Stoxx 50 rose 0.56%, and Germany’s DAX 30 increased 0.58%.

Meanwhile, U.S. stock futures also gained strength, with Nasdaq 100 futures up 0.64%, Dow Jones futures up 0.5%, and S&P 500 futures up 0.49%.

During the Asian trading session on the 18th, Asia-Pacific markets also surged across the board. By the close, the MSCI Asia Emerging Markets Index rose over 2%. In China, the Shanghai Composite gained 0.32%, the ChiNext Index surged 2.02%, and the STAR Market Index increased 1.77%. Japan and Korea also closed significantly higher, with the Nikkei 225 up 2.87% and South Korea’s KOSPI soaring 5.04%.

Analysts noted that the adjustment in international oil prices has alleviated concerns about disruptions in Middle Eastern crude oil supplies.

According to Reuters, data from the American Petroleum Institute (API) showed that U.S. crude oil inventories increased significantly more than expected last week, easing market panic. Meanwhile, U.S. military forces used bunker-buster bombs to destroy missile sites near the Strait of Hormuz in Iran. Oil market analyst Andy Lipow commented, “This brings some optimism to the market, making it seem like the days of safe passage for oil tankers returning to the strait are approaching.”

Although overall market sentiment has improved, some analysts warn that high volatility in financial markets may persist until energy markets truly stabilize. Senior strategist Louis Navellier stated that the stock market’s ability to rise amid rising oil prices mainly reflects market confidence in corporate earnings and economic growth. However, he emphasized that investors should expect continued market fluctuations until energy conditions stabilize.

Invesco strategist David Chao reminded that historical data shows that recovery from supply shocks in oil prices and stocks typically takes about 4 to 5 months. This means that even if current tensions ease, it will take time for markets to fully digest the impact.

Federal Reserve’s major announcement

As geopolitical tensions and inflation expectations continue to intertwine, global markets are now focused on the upcoming Fed interest rate decision.

According to the schedule, the Federal Reserve will announce its rate decision at 2 a.m. Beijing time on March 19, followed by a press conference with Chairman Powell 30 minutes later.

Pricing in the futures market indicates that the probability of the Federal Open Market Committee (FOMC) cutting rates at this meeting is nearly zero—the target range for the federal funds rate is expected to remain at 3.5% to 3.75%, with no rate cuts in the near term.

Industry insiders generally expect that the FOMC may mention Iran-related conflicts in its statement, hinting that the escalation of the conflict has increased geopolitical and economic uncertainties. Fed officials may also need to update their assessment of the U.S. labor market to reflect recent employment data fluctuations.

Although the market widely expects rates to remain unchanged, Powell’s wording during the press conference will be a key signal—investors are eager to understand how the Fed will respond if the war begins to exert opposing pressures on the labor market and inflation.

Experts predict that Powell may emphasize that officials need more time to observe how long the Iran conflict lasts and to assess its potential chain reactions on economic growth and inflation. He might also highlight the high uncertainty of the current environment and the need for the Fed to maintain policy flexibility.

Bei Chen Lin, senior investment strategist at Russell Investments, said that any signals from Powell regarding future rate paths will be crucial. From a broad perspective, the U.S. economy remains fundamentally sound, meaning the threshold for further rate cuts could be quite high.

Another key point of this Fed decision is the release of the first dot plot for this year. Investors will have a chance to gain deeper insight into Fed officials’ expectations for interest rates over the coming years.

Timiraos, known as the “voice of the Fed,” stated that the forecast from the dot plot is likely to dominate market reactions to this week’s Fed meeting.

Goldman Sachs predicts that the upcoming dot plot may show a median interest rate of 3.25% to 3.50% in 2026, with rates in 2027, 2028, and beyond possibly between 3.00% and 3.25%.

This would imply that the Fed plans to cut rates once in 2026, then again in 2027, reaching a neutral level. This aligns with the December last year dot plot. Goldman Sachs speculates that some Fed officials may support an early rate cut due to recent negative labor market data, while others may favor delaying cuts due to inflation concerns.