Hong Kong stocks fell on Thursday as the U.S. Federal Reserve signaled rising inflation risks, with markets also pressured by escalating tensions in the Middle East.

The Hang Seng Index lost 524.84 points, or 2%, to close at 25,500.58, while the Hang Seng China Enterprises Index fell 139.62 points, or 1.6%, to 8,695.88.

Oil prices rose Thursday, with Brent hitting its highest level in over a week after Iran struck energy infrastructure across the Middle East following a strike on the South Pars gas field.

The U.S. central bank left interest rates unchanged on Wednesday and projected higher inflation, steady unemployment, and a single rate cut this year.

Federal Reserve Chair Jerome Powell said the path ahead remains highly uncertain as officials assess the economic impact of the U.S.-Israeli conflict with Iran.

At home, the Hong Kong Monetary Authority kept its base rate unchanged at 4%, in line with the Fed's decision.

In corporate news, Tencent (HKG:0700) closed nearly 7% lower despite a 14% increase in fourth-quarter 2025 profit.

Kaisa Health (HKG:0876) plunged over 47% after agreeing to acquire a controlling stake in a Chinese drug manufacturer for 21.6 million yuan.