Fed week: oil sinks 5% as Wall Street rallies

The Fed has to rule on rates this Wednesday, and the market is no longer so sure of the script. Oil is sinking 5% this Monday after the US and Iran paused their strikes over the weekend, taking some pressure off inflation. Wall Street is taking the relief and futures point to a higher open ahead of a loaded week for the Fed.

The Fed is stuck in an awkward spot

Ten days ago nobody was talking about a rate hike. Now they are. According to The Motley Fool, the odds of a hike at the July 29 meeting have tripled in a week on CME FedWatch, to around 38%. The reason is simple. The oil spike tied to the US-Iran conflict reignited inflation worries. Fed Governor Lisa Cook has cited inflation running around 3.7%, well above the 2% target. Vice Chair Philip Jefferson and Governor Christopher Waller have both left the door open to adjusting policy if prices don't cool. Nigel Green, CEO of deVere Group, summed up the mood: "the Fed will find holding steady a harder case to make than it looked even a few weeks ago." The decision lands Wednesday at 2pm ET, followed by a press conference at 2:30pm, the first real high-stakes one for Kevin Warsh since he took over as Fed chair in May. Most economists still expect a hold in the 3.50% to 3.75% range, but the tone will matter as much as the decision itself.

Oil sinks, inflation pressure eases

That's today's big move. WTI is down roughly 5% this Monday morning, back under $85, according to Investing.com and FX Leaders. The trigger is the pause in US-Iran strikes, confirmed for a second straight day by the Washington Post and NPR. Less supply risk means less fear premium in the barrel. For US stocks, that's good news twice over. Calmer oil takes an argument away from Fed hawks and gives equities some room to breathe.

Wall Street exits a rocky week

Last Thursday, stocks tanked. The S&P 500 lost 1.2%, the Nasdaq 2.2%, and Magnificent Seven names wiped out nearly $797 billion in market value in a single session, the worst since April 2025 according to The Motley Fool. The trigger was massive AI spending plans from Tesla and Alphabet, which made investors question the payoff, as CNBC reported. Friday brought stability. The S&P 500 closed at 7,411.98, nearly flat, the Dow Jones climbed 0.46% to 51,947.25, and the Nasdaq limited the damage to -0.64%, ending at 24,975.82 for a second straight losing week, per TheStreet. This Monday, futures are climbing solidly, lifted by the oil pullback and ahead of earnings from Apple, Microsoft, Amazon and Meta this week.

Key levels today

Economic calendar

• Tuesday, July 28, 4:00pm Paris time: US Consumer Confidence (Conference Board). A weak print backs the case for a cautious Fed hold. A upside surprise would feed bets on a firmer tone.
• Wednesday, July 29, 8:00pm Paris time: Fed rate decision, Kevin Warsh press conference at 8:30pm. A hold with a hawkish tone would lift the dollar and could weigh on stocks. A softer tone despite the recent oil spike would relieve Wall Street.
• Thursday, July 30, 2:30pm Paris time: US Q2 GDP and core PCE, the Fed's preferred inflation gauge. A solid GDP paired with hot PCE would strengthen bets on a restrictive tone. Soft numbers would tilt the balance toward a more relaxed Fed.
• Thursday, July 30, 1:00pm Paris time: Bank of England rate decision. A surprise cut would weigh on the pound and could revive the central bank divergence debate.

This calendar is built from data from LiteFinance.

The bottom line

Oil sinking 5% this Monday gives Wall Street some breathing room ahead of Wednesday's Fed decision. But with hike odds tripling in a week, this one is far from settled.

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This is not investment advice.