US financial markets faced renewed pressure on Wednesday as hotter-than-expected underlying inflation reinforced expectations of further Federal Reserve rate increases.
Rising energy prices added to inflation concerns, while Treasury yields and the US dollar climbed, weighing on gold and Bitcoin.
Geopolitical tensions involving Iran, Saudi Arabia and shipping routes in the Middle East also pushed oil prices higher.
US CPI rises 3.7% annually, lifting Fed rate hike expectations
US consumer inflation accelerated in September, with the consumer price index (CPI) rising 0.6% month-on-month and 3.7% year-on-year, according to the Bureau of Labor Statistics.
The annual rate increased from 3.4% in August, while the monthly reading matched economists’ expectations.
Core CPI, which excludes food and energy, rose 0.3% during the month and 2.6% over the year, exceeding forecasts of 0.2% and 2.5%, respectively.
Higher gasoline prices were the primary driver of the monthly increase.
The gasoline index jumped 9.1%, accounting for more than half of the overall CPI rise.
The broader energy index advanced 5.2%, while shelter costs increased 0.4%. Food prices were unchanged.
The data strengthened expectations that the Federal Reserve could raise interest rates again.
Markets increased the probability of an October rate hike to around 42%–43%, from approximately 22% before the report. Expectations for another increase in December also strengthened.
The Fed raised its benchmark rate by 25 basis points in September to a range of 3.75% to 4.00%.
However, policymakers must weigh persistent inflation against signs of weakness in the labour market before deciding on further tightening.
Oil prices rise as Middle East tensions threaten supplies
Oil prices climbed on Wednesday as attacks involving Saudi Arabia and Iran raised concerns about energy supplies and shipping through the Strait of Hormuz.
Brent crude futures rose 0.32% to $106.03 a barrel, while US West Texas Intermediate crude gained 1% to $95.08, reaching a three-week high.
The Houthi movement attacked an administrative building belonging to Saudi Aramco in Dhahran, causing a limited fire, according to Saudi Arabia’s energy ministry.
Meanwhile, Iran indicated it was deploying new tactics to target shipping, while a container ship sank after hitting a naval mine and catching fire in waters south of the Strait of Hormuz.
The developments added to concerns about disruptions along a critical route for global energy shipments.
Although Gulf oil flows excluding Iran recovered to more than 81% of prewar levels in September, the improvement did not necessarily indicate an equivalent increase in production.
Some of the recovery reflected the redistribution of available crude supplies.
The International Energy Agency also warned that limited Russian refinery capacity could restrict the impact of recently eased Russian diesel export restrictions, potentially keeping diesel supplies tight into next year.
Gold falls as dollar and Treasury yields climb
Gold prices declined for a third consecutive session as the stronger inflation report increased expectations of further US interest rate increases.
Spot gold fell 1.3% to $4,100 an ounce. US gold futures for December delivery settled 1.26% lower at $4,124.80 an ounce.
The US dollar index rose 0.5%, while the 10-year Treasury yield climbed more than six basis points to 5.278%. Higher yields increase the opportunity cost of holding gold, which does not generate interest income.
The prospect of tighter monetary policy added to the pressure on bullion, despite its traditional role as an inflation hedge.
Longer-term support could come from continued central-bank purchases and concerns about US government debt.
Bitcoin falls as risk appetite weakens
Bitcoin declined as much as 1.7%, trading around $81,700 as investors reduced exposure to riskier assets following the inflation data.
The move coincided with a broader market retreat.
The Nasdaq 100 fell as much as 2%, while the dollar strengthened to its highest level since May 2025 as traders increased bets on further Federal Reserve rate hikes.
Despite the decline, sentiment among crypto analysts has improved.
A CryptoQuant report showed its 30-day Bitcoin analyst consensus index rising from minus 18.3 in July to plus 49.2, with the share of bullish analysts increasing to 84% from 37%.
However, Bitcoin remains more than 30% below its record high, and attempts to sustain a recovery have repeatedly struggled.
Elevated inflation, high energy prices, and concerns about AI-related investments continue to weigh on broader risk appetite.
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