Fed Holds Rates Steady, but Says Iran War Causing Economic Uncertainty

Summary

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WSJ What’s News PM Edition – Summary

Episode Title: Fed Holds Rates Steady, but Says Iran War Causing Economic Uncertainty
Date: March 18, 2026
Host: Alex Osola, The Wall Street Journal

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Episode Overview

This episode centers on the Federal Reserve’s decision to hold interest rates steady amid growing economic and geopolitical uncertainty driven by the ongoing war between Iran and Israel. The discussion spans the Fed’s outlook, energy and market volatility, U.S. policy responses (including a rare Jones Act waiver), the stress in private credit markets, and significant escalations in the Middle East conflict. The episode closes with updates on President Trump’s pick for Secretary of Homeland Security.

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Key Discussion Points and Insights

1. Federal Reserve Decision: Rates Held Steady

[00:33 – 04:29]

• Fed’s Decision: For the second consecutive meeting, the Federal Reserve held interest rates steady. The conflict in Iran creates significant uncertainty regarding future economic conditions and inflation.

• Energy Prices and Inflation: Chair Jerome Powell acknowledges higher energy prices as a result of the war, warning these could keep or even raise already persistent inflation.

  • Quote:
    “The implications of events in the Middle East for the US Economy are uncertain. In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy.”
    — Jerome Powell, Fed Chair [01:53]

• Projections for Rate Cuts:

  • Most officials now foresee just one rate cut in 2026, downgrading earlier expectations for multiple reductions.
  • Powell underscores a “wait and see” approach, monitoring both global risks and domestic inflation—including impacts from tariffs.
  • Some at the meeting suggested a rate hike could be possible, though this isn’t the mainstream view.
  • Insight: The Iran conflict isn’t the sole factor dampening prospects for monetary easing; stubborn core inflation and tariffs add to the Fed’s caution.

• Political Pressure on the Fed:

  • President Trump continues to pressure Powell and the Fed to lower rates.
  • Powell reaffirms his position and intent to stay on the board amid ongoing investigations and political scrutiny:
    • Quote:
      “I have no intention of leaving the board until the investigation is well and truly over.”
      — Jerome Powell, Fed Chair [04:07]

• Market Reaction:

  • Stocks tumbled on Powell’s comments, with all three major U.S. indexes dropping over 1%; the Dow fell 1.6%.

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2. Energy Markets and the Jones Act Waiver

[04:29 – 06:39]

• Oil Price Surge:
  • Renewed attacks in the Middle East pushed Brent crude above $111 in after-hours trading.
  • The U.S. issued a rare 60-day Jones Act waiver to try to alleviate high domestic energy costs.
• About the Jones Act:
  • Requires goods transported between U.S. ports to be shipped on American vessels with American crews; waiving it is exceptional.
  • Previous Waivers: After disasters like Hurricane Maria (2017), Hurricane Fiona (2022), Colonial Pipeline cyberattack (2021).
• Intended Effect:
  • Waiving the Act reduces transportation costs by allowing foreign-flagged, less expensive ships, aiming to lower energy prices.
  • Quote:
    “If you build a ship that’s three times more expensive, the insurance for the ship itself is expensive. So waiving it, the transport cost will be cut down substantially.”
    — Costas Paris, WSJ [05:56]

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3. Private Credit Market Stress

[06:39 – 07:29]

• Stone Ridge Asset Management:
  • The fund is restricting redemptions, only honoring 11% of the requested cash-outs.
  • Underlying cause: Investors’ fears about the impact of artificial intelligence on corporate borrowers.
• Broader Trend:
  • Private credit funds face liquidity stress as redemption requests spike amid market uncertainty.

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4. Escalation in the Middle East

[08:09 – 11:51]

• Major Attacks:

  • Israel claims to have killed Iran’s Intelligence Minister and struck Iran’s South Pars gas field.
  • Iran retaliated, hitting a Qatari LNG hub with ballistic missiles; Gulf states are on high alert, evacuating key energy facilities.
  • Saudi Arabia intercepted four missiles aimed at Riyadh.

• US Military Role:

  • The U.S. is sending the 31st Marine Expeditionary Unit (2,200 Marines) to the region.
  • Potential Mission:
    • Seize Iranian islands in/around the Strait of Hormuz (e.g., Kharg, Hesham islands) to counter Iran’s blockage of shipping lanes and use these islands for negotiation leverage.
    • Quote:
      “The U.S. marines...could be deployed to seize some of the islands off of the southern coast of Iran, which Iran is using to threaten commercial traffic in the Strait. Kharg island is the most strategic one economically—it's host to about 90% of Iran’s oil exports.”
      — Lara Seligman, WSJ [09:47]
  • Political Maneuvering:
    • Island seizures offer a legal/political loophole for the U.S. president to claim “no boots on the ground” in Iran proper, maintaining campaign promises.
    • Quote:
      “You could argue that this allows him to argue he has not broken his campaign promise.”
      — Lara Seligman, WSJ [11:18]

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5. Homeland Security Nominee Faces Confirmation

[11:58 – 12:29]

• Sen. Mark Wayne Mullen (R-OK):
  • At his confirmation hearing to lead DHS, Mullen promises a lower-profile style than his predecessor, while supporting Trump’s immigration policies.
  • Quote:
    “My goal in six months is that we’re not in the lead story every single day...My goal is for people to understand we're out there, we're protecting them.”
    — Mark Wayne Mullen [12:13, 12:20]

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Memorable Moments & Key Quotes

• Powell’s Uncertainty:
  “In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration...” — Powell [01:53]
• Fed’s Patience:
  “There were a couple people at today’s meeting who suggested that a potential rate hike might be a possibility...” — Matt Grossman [02:28]
• Stance on Investigation:
  “I have no intention of leaving the board until the investigation is well and truly over.” — Powell [04:07]
• Jones Act Explanation:
  “Waiving it, the transport cost will be cut down substantially.” — Costas Paris [05:56]
• US Strategy in the Strait of Hormuz:
  “They call the Marine Corps the Swiss army knife of the US Military. They can basically do anything.” — Lara Seligman [09:47]
• Political Leeway on “Boots on the Ground”:
  “You could argue that this allows him to argue he has not broken his campaign promise.” — Lara Seligman [11:18]
• DHS Nominee’s Approach:
  “My goal in six months is that we’re not in the lead story every single day...” — Mark Wayne Mullen [12:13]

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Timestamps for Important Segments

• Fed Decision & Powell’s Press Conference: [00:33 – 04:29]
• Market Reaction & Jones Act Waiver: [04:29 – 06:39]
• Private Credit Market Stress: [06:39 – 07:29]
• Middle East Escalation & US Military Response: [08:09 – 11:51]
• Homeland Security Nominee Hearing: [11:58 – 12:29]

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Tone and Style

The episode maintains a direct, informative, and analytical tone, blending succinct market summaries with in-depth policy analysis and on-the-ground geopolitics. The language is accessible for business and policy followers, with expert commentary throughout.

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Transcript

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[Alex Osola]

the Fed holds rates steady, but the war with Iran clouds its outlook for future decisions. Plus, oil prices rose again today after new attacks on Middle east energy infrastructure and how U.S. marines could help reopen the Strait of Hormuz and get oil flowing again.

[Lara Seligman]

This unit is typically used for raids or special operations. It seems likely that the U.S. marines that are being sent to the Middle east could be deployed to seize some of the islands off of the southern coast of Iran.

[Alex Osola]

It's Wednesday, March 18th. I'm Alex Osola for the Wall Street Journal. This is the PM edition of what's the top headlines and business stories that move the world today. The Federal Reserve held interest rates steady today for the second meeting in a row. And for later this year, officials kept open the possibility of cutting rates even even as higher energy prices from the Iran war threaten to make bringing down inflation more difficult. For more on the Fed's decision, I'm joined now by WSJ economics reporter Matt Grossman. Matt, how did officials talk about the prospect of rising inflation due to higher energy prices? Did they see it basically as a guarantee? Are they still going to kind of wait and see?

[Jerome Powell]

Well, in his press conference today, Chair Powell talked about the effects of the war in Iran as highly uncertain.

[Jerome Powell (Direct Quotes)]

The implications of events in the Middle east for the US Economy are uncertain. In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy.

[Jerome Powell]

What he did point to was the risk that some of the inflation that was already part of the economy before the conflict started could stick with us and that the Fed has been a bit frustrated that they haven't seen more progress on that so far this year.

[Alex Osola]

The Fed officials make projections about future rate cuts and increases. Have those changed at all?

[Jerome Powell]

The top line result is the median Fed official penciling in one interest rate cut over the rest of this year. Under the surface, there were some officials who previously thought the Fed could cut several times who narrowed that forecast a little bit, seeing less of a path toward more than one cut this year. So there wasn't a dramatic change in the rate projections. But in his press conference, Chair Powell really emphasized that the Fed isn't just concerned about the Iran conflict as far as more rate cuts go. They also really want to see more progress on some of the underlying inflation and the tariff driven inflation before they think about bringing rates down farther. He mentioned that there were a couple people at today's meeting who suggested that a potential rate hike might be a possibility in the future, although he did emphasize that that is not the view of most of the people on the committee.

[Alex Osola]

President Trump has continued to put pressure on the Fed as recently as this week, in fact, to cut rates. Did we see that have an impact today?

[Jerome Powell]

Well, Powell only talked briefly about the investigation that he's been facing, he has said as part of Trump's pressure campaign to influence how the Fed sets rates. Powell's term as chair of the Fed ends in May, but even after May, Powell would have the opportunity to stay on the Fed in his role as a governor, a member of the board. And today Powell reiterated something that came up in a legal filing last week, which was that he really wants to stay in that position until the investigation wraps up.

[Jerome Powell (Direct Quotes)]

And while I'm at it on the question whether I will leave while the investigation is ongoing, I have no intention of leaving the board until the investigation is well and truly over.

[Jerome Powell]

In other words, doesn't want to leave under duress.

[Alex Osola]

That was WSJ economics reporter Matt Grossman. Thanks, Matt.

[Jerome Powell]

Thanks.

[Alex Osola]

Powell's comments about rising oil prices and the effect on US Economic growth sent stocks tumbling, closing near session lows. The Fed meeting left investors thinking future rate cuts were less likely. All three major US indexes ended more than 1% lower, with the Dow leading the losses, falling 1.6%. Meanwhile, more attacks on Middle east energy infrastructure send oil prices soaring. Brent crude futures, the global oil benchmark, settled around $107 a barrel, but soared above $111 a barrel in after hours trading. Today, in an effort to curb rising energy prices, President Trump issued a 60 day waiver of the Jones Act. The law's been around for a century and it requires that ships moving goods between US Ports sail under a US Flag and have a crew of sailors that are US Citizens. I'm joined now by Costas Paris, who covers shipping for the Journal, to talk about why the president is doing this. Now, Costas, is it common to see the Jones act waived? When have we seen this in the past?

[Costas Paris]

Very, very rarely. The US Government granted one after Hurricane Maria devastated Puerto Rico in 2017 and again after the island was struck by Hurricane Fiona in 2022. Another waiver was granted in 2021 for fuel shipments to the east coast after the Colonial pipeline shut down following a cyberattack.

[Alex Osola]

How would waiving the act lead to lower oil prices? Can you just like connect those dots?

[Costas Paris]

For us Moving oil from US Port to US Port requires Jones act ships. Those ships cost to be built about three times as much compared to Asia. That's the one thing. The second higher cost is manning it with American crews. American sailors are more expensive. And of course, if you build a ship that's three times more expensive, the insurance for the ship itself is expensive. So waving it, the transport cost will be cut down substantially.

[Alex Osola]

That was WSJ reporter Costas Paris. Thanks, Costas.

[Costas Paris]

Thank you guys.

[Alex Osola]

And turning to private markets, we're exclusively reporting that Stone Ridge Asset Management, a fund holding consumer and small business loans, is the latest corner of the private credit market to come under stress. The Wall Street Journal saw an investor update the firm put out last week. It said recent redemption requests were so high that it would only honor 11% of the amount investors wanted back. Lots of investors have been wanting to cash out a private credit in recent weeks, and fund managers have had to grapple with whether to relax their existing redemption limits. Many of those funds held loans to software makers or other corporate sectors that investors fear will be displaced by advances in artificial intelligence. Coming up, we've got the latest on the conflict in the Middle east and President Trump's pick to lead the Department of Homeland Security sits for a confirmation hearing. That's after the break.

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[Alex Osola]

In the Middle East. Israel says it's killed Iranian Intelligence Minister Esmeel Khatib, the latest member of Tehran's top leadership it has killed. This week, Israel said Khatib played a significant role during the Tehran regime's crackdown on recent protests and said it had planned to hunt down all of Iran's leadership. Iran confirmed Khatib's killing with its president saying he was heartbroken by the death. Separately, earlier today, Israel struck Iran's massive South Pars gas field, which Tehran shares with Qatar. An American official said the US Was aware of the operation. Later, a ballistic missile fired by Iran hit a major liquefied natural gas hub in Qatar, causing extensive damage. In response to the Israeli strike, Iran said it considered refineries, petrochemical facilities and gas fields to be, quote, legitimate and prime targets. Oil officials in Qatar, Saudi Arabia, and the United Arab Emirates evacuated oil infrastructure. Meanwhile, Saudi Arabia said that it intercepted and destroyed four ballistic missiles fired toward its capital, Riyadh, with debris falling in parts of the city. No initial damage or injuries were reported. And we told you last week that the Pentagon is moving additional Marines and warships to the Middle East. Those forces, the 31st Marine Expeditionary Unit, a rapid response force of about 2,200 Marines, are expected to arrive next week. One of the ways the US could use those forces is to reopen the Strait of Hormuz, that critical pathway for the world's oil that Iran has effectively closed. I'm joined now by Lara Seligman, who covers national security for the Journal. Lara, what is the Marine Expeditionary Unit, and how could the US Use it in the Middle East?

[Lara Seligman]

This unit is typically used for raids or special operations. They call the Marine Corps the Swiss army knife of the US Military. They can basically do anything. Based on my conversations with current and former U.S. officials, it seems likely that the U.S. marines that are being sent to the Middle east could be deployed to seize some of the islands off of the southern coast of Iran, which Iran is using to threaten commercial traffic in the Strait. Kharg island is the most strategic one economically. It's host to about 90% of Iran's oil exports. So if the Marines seize this island, then they could potentially use that as a bargaining chip to get Iran to open the strait. There's multiple other islands that are actually in the strait itself. Hesham island, right at the mouth, if you will, of the strait. That's host to a bunch of Iranian missile facilities and Iranian naval facilities as well. Seizing an island like that could allow the US Military the high ground and the ability to use that position to then counter Iranian fast boats and missiles. And then there's Kish island and Hormuz island as well, which are much smaller, but also very strategically located.

[Alex Osola]

Boots on the ground is a red line for a lot of Americans, including many Republicans who have supported President Trump in this conflict. Does deploying this unit mean that that's happening or could happen? And what would that mean for the president?

[Lara Seligman]

Well, I think this is an interesting method to offer a bit of a loophole for that, because these islands, some of them are actually disputed by the Emiratis, and they're, of course, islands. They're not Iran proper. So it does give the president a little bit of leeway to say, hey, we haven't actually put American boots on the ground, which is something that he's long promised to avoid. You know, we're just putting the American, American boots on in some of these rocky islands off the coast of Iran. You could argue that this allows him to argue he has not broken his campaign promise.

[Alex Osola]

That was Wall Street Journal reporter Laura Seligman. Thanks, Laura.

[Lara Seligman]

Thanks for having me.

[Alex Osola]

President Trump's pick to lead the Department of Homeland Security. Republican Senator Mark Wayne Mullen faced lawmakers during his confirmation hearing today. The Oklahoma senator said he would take a lower profile approach to the job than Kristi Noem while backing Trump's immigration crackdown.

[Jerome Powell (Direct Quotes)]

My goal in six months is that

[Alex Osola]

we're not in the lead story every single day.

[Jerome Powell (Direct Quotes)]

My goal is for people to understand we're out there, we're protecting them.

[Alex Osola]

And that's what's news for this Wednesday afternoon. Today's show is produced by Pierre Biennime with supervising producer Tali Arbel. I'm Alex Osoleff for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

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