Fed rate hike and falling oil prices calm volatile week

A volatile week in global markets ended on a calmer note Friday as the Federal Reserve's first interest-rate increase since 2023 and a sharp retreat in oil prices combined to ease inflation concerns that had rattled investors just days earlier.

Gold held gains near $4,350 an ounce after rising almost 2% on Thursday, recovering much of its earlier weekly losses as Treasury yields pulled back from their post-Fed spike. Brent crude dropped nearly 7% on the week to just above $102 per barrel, helped by hopes that Saudi Arabia could restore roughly half of production capacity at its East-West pipeline following Houthi attacks.bloomberg+1

The Fed Sets the Tone

The Fed's unanimous decision on Wednesday to raise rates by a quarter percentage point — its first hike in three years — anchored the week's market narrative. Rather than spooking investors, the move reinforced the central bank's commitment to fighting inflation, which helped calm a bond market that had seen the 10-year Treasury yield briefly breach 5% for the first time since 2007. By Friday, yields were declining across maturities, lifting pressure on non-yielding assets like gold.devdiscourse+1

Oil Retreat Soothes Nerves

The pullback in crude prices provided further relief. Reports that China has asked Tehran to help rein in Yemen's Houthis, along with signs that oil shipments are getting through the Strait of Hormuz, helped push prices lower even as the broader Middle East conflict, now more than six months old, showed few signs of ending. Analysts noted there remains no consensus on where oil heads next, with $100 per barrel the key level to watch.xtb+1

Global Markets Find Footing

Asian stocks rose Friday, with Japan's Nikkei 225 climbing nearly 2% after the Bank of Japan raised rates to 1.25% but sent mixed signals about further tightening — two board members dissented, pushing the yen lower. South Korea's Kospi surged over 2%, and the S&P 500 was on track for a weekly gain. Chip stocks also recovered, with the Philadelphia Semiconductor Index rising 3% on Thursday as investors refocused on long-term demand for AI-related hardware.xtb+1

"The tone of the statement, along with two dissenters for the decision to raise rates, leaves lingering doubts that Japan's central bank will be cautious in tightening monetary policy further," said Fred Neumann, chief Asia economist at HSBC ↘ 1.58%.devdiscourse