US financial markets faced renewed pressure on Wednesday as a hotter-than-expected core inflation reading 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.
Inflation Data Strengthens Fed Hike Bets
The consumer price index (CPI) rose 0.6% month-on-month and 3.7% year-on-year in September, according to the Bureau of Labor Statistics. The annual rate accelerated from 3.4% in August, while the monthly reading matched economists' forecasts.
Core CPI, which excludes food and energy, advanced 0.3% during the month and 2.6% over the year, exceeding expectations of 0.2% and 2.5%, respectively. Higher gasoline prices were the primary driver, with the gasoline index jumping 9.1% and accounting for more than half of the overall increase. The broader energy index rose 5.2%, shelter costs increased 0.4%, and 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%, up from approximately 22% before the report. Expectations for another increase in December also firmed. 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 Rises on Middle East Supply Concerns
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, and a container ship sank after hitting a naval mine and catching fire in waters south of the Strait of Hormuz. These 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, as 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 Declines as Dollar and Yields Climb
Gold prices fell for a third consecutive session as the stronger inflation report increased expectations of further US interest rate increases. Spot gold dropped 1.3% to $4,100 an ounce, while US gold futures for December delivery settled 1.26% lower at $4,124.80 an ounce.
The US dollar index rose 0.5%, and 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 Slides as Risk Appetite Weakens
Bitcoin declined as much as 1.7%, trading around $81,700, following the inflation data. The move coincided with a broader market retreat, with the Nasdaq 100 falling as much as 2% as investors reduced exposure to riskier assets. The dollar strengthened to its highest level since May 2025, adding further pressure on cryptocurrencies.
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%. 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.
This article is for informational purposes only and does not constitute financial advice.
