NEW YORK, April 30 (Reuters) - Investors are turning the page to a newly led U.S. Federal Reserve that has long been expected to have a more dovish bent, but instead faces a bumpier rates path ahead.

The Fed meeting that concluded on Wednesday was set to be Jerome Powell's last as the chair of the central bank, with Kevin Warsh on track to take over. Warsh was picked by U.S. President Donald Trump, who heavily favors rate cuts, but the divisions revealed in the Fed decision showed barriers to monetary easing.

A move to lower rates over the past couple of years and the expected bias toward further easing have supported risk assets, but a more hawkish-than-anticipated rate path could become problematic for equities and many corners of the fixed income market. Meanwhile, some investors have shifted their portfolios to protect against inflation amid the energy price surge, such as by buying inflation-protected Treasuries. 

"The markets and those following the Fed have kind of said, well, this new Fed chair is going to be dovish regardless," said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments. "And I think as we get closer to that time, with this meeting ... with the data not really helping the cause for cuts, you add it all up and it's not clear that the Fed should cut or that the Fed will cut."

Indeed, following the meeting, futures pricing indicated markets had ruled out cuts for the remainder of the year.

'SHOT ACROSS THE BOW'

The Fed held interest rates steady in its monetary policy decision on Wednesday, which was widely expected. But the decision was the central bank's most divided since 1992, including three dissents from officials who no longer feel the Fed should communicate a bias towards lowering borrowing costs.

The dissents represented "a shot across the bow" to Warsh, said Chris Grisanti, chief market strategist at MAI Capital Management. "The dissenters are saying 'you cannot take for granted that we will support your easing intentions.' I suspect there will be a lot of drama ahead."

Uncertainty over the U.S.-Israeli war in Iran and its impact on energy prices and inflation cast a shadow over the meeting, with U.S. crude up over 80% this year. Oil prices surged on Wednesday, with U.S. crude settling at about $107 a barrel, as deadlocked negotiations caused investor worries about prolonged disruptions to Middle Eastern supply.

Following the Fed decision, benchmark Treasury yields hit one-month highs, with the 10-year yield at 4.42% late on Wednesday. 

The benchmark S&P 500 stock index ended little changed on the day after falling initially following the Fed decision. The U.S. dollar index modestly extended gains against a basket of currencies.

PRICING OUT CUTS IN 2026?

The Fed cut its benchmark rate by 175 basis points in 2024 and 2025, but has held it steady in the 3.5%-3.75% range so far this year. Heading into 2026, markets had expected about two more standard quarter-percentage-point cuts by the end of this year, but the Middle East war and the resulting higher energy prices undercut those hopes.

"At the beginning of the year, the Fed had a pretty clear path to rate cuts," said Joseph Purtell, a portfolio manager at Neuberger. "The advent of the Iranian conflict and the oil price shock have changed all of this."

Following Wednesday's meeting, Fed Funds futures had largely ruled out rate cuts this year and were pricing in a potential hike in the first half of next year, according to LSEG data.

"We've seen some of the more dovish members move toward the center," said Dustin Reid, chief strategist, fixed income at Mackenzie Investments in Toronto. "The real discussion becomes could the Fed hike, should it and will it, in the second half of the year."

Trump has consistently chastised Powell -- who began as chair in 2018 after being nominated by Trump -- for the Fed not cutting rates more significantly. Investors have anticipated that Warsh may take a more dovish stance but at his confirmation hearing earlier this month, Warsh said he had made no promises to Trump about cutting interest rates.

Warsh "is still dealing with an administration that is fervently in the corner of cutting rates at a time that it may not necessarily be called for quite yet because the unemployment picture still doesn't necessarily warrant it," said Gregg Abella, CEO at Investment Partners Asset Management. "I'd be surprised, if right out of the gate, he's able to persuade the other governors on the board of the Fed that this (rate cuts) needs to happen imminently."

Not everyone had taken rate cuts off the table entirely this year. Analysts at Citi said in a note that they continue "to project that cooler inflation and renewed loosening labor markets" will lead to rate reductions in September, adding that "rate cuts can be rapidly priced back in by markets if oil prices fall."

Michael Reynolds, vice president of investment strategy at Glenmede, said his firm was looking for opportunistic bets on shares of smaller companies, which tend to benefit from lower rates. 

"I'm kind of skeptical of this emerging narrative that a hike is more likely than a cut this year," Reynolds said.