U.S. stock index futures retreated on Thursday as investors assessed the expanding fallout from an intensifying conflict in the Middle East, following a cautious rebound the previous session. Earlier in the day Iran fired a fresh wave of missiles toward Israel, occurring just hours after diplomatic efforts in Washington to stop a U.S. air assault failed to make headway.
Safe-haven assets continued to attract demand. Gold and the U.S. dollar recorded further gains, while U.S. Treasuries cooled and the 10-year Treasury yield climbed to its highest level since early February. Energy markets were a particular focus: oil, which had already surged more than 3% on the day and risen over 15% for the week, pushed higher as the conflict entered its sixth day, sustaining concerns that rising fuel costs could filter through to the broader economy and complicate the Federal Reserve's outlook.
By 02:40 a.m. ET, futures prices showed significant moves in equity benchmarks. Dow E-minis were down 185 points, or 0.38%. S&P 500 E-minis were down 14 points, or 0.2%. Nasdaq 100 E-minis had fallen 62.75 points, or 0.25%.
Despite market nerves over a potentially protracted confrontation and renewed inflation worries driven by higher energy prices, investors have been quick to re-enter technology stocks. The Nasdaq has risen 0.6% so far this week as buyers targeted tech names that had been sold off earlier in the week and were hit hard in the prior month. The S&P 500, in contrast, was trading slightly lower overall.
The modest recovery seen on Wednesday was again led by technology shares. The Nasdaq climbed 1.29%, the S&P 500 gained 0.8%, and the Dow finished 0.5% higher. Contributing to calmer sentiment were reports suggesting Iran may be open to talks and U.S. President Donald Trump's assurance that he would seek to keep oil markets steady.
Market participants also drew support from incoming data indicating that U.S. economic activity remains resilient, and from government officials downplaying the inflation impact of the jump in oil prices. Still, the prospect that higher energy costs could exert upward pressure on inflation remains a central concern for investors weighing interest-rate expectations.
Attention now turns to a slate of U.S. economic releases and central bank signals. Markets will first parse weekly jobless claims later in the day and then move toward the monthly non-farm payrolls report due on Friday. Investors will also be listening for further guidance from Federal Reserve officials after a series of hawkish comments; remarks from U.S. Fed Vice Chair Michelle Bowman are scheduled for later in the day.
Key points
- Geopolitical escalation - A fresh Iranian missile barrage toward Israel helped push investors toward safe-haven assets and lifted oil prices, pressuring equity futures.
- Market moves - At 02:40 a.m. ET, Dow E-minis were down 185 points (-0.38%), S&P 500 E-minis down 14 points (-0.2%), Nasdaq 100 E-minis down 62.75 points (-0.25%).
- Sector impacts - Energy markets drove concerns about inflation and economic spillovers, while technology stocks saw renewed buying despite broader market jitters.
Risks and uncertainties
- Prolonged conflict - An extended Middle East conflict could continue to elevate oil prices and sustain market volatility, affecting energy and broader economic activity.
- Inflation pass-through - Rising fuel costs risk feeding into inflation, complicating the Federal Reserve's policy outlook and influencing bond markets and interest rates.
- Data and policy sensitivity - Upcoming U.S. labor reports and Fed commentary, including remarks from Fed Vice Chair Michelle Bowman, create near-term uncertainty for market direction.