March 17 - U.S. equity futures weakened on Tuesday as elevated oil prices linked to the widening Middle East conflict rekindled concerns about inflation at a moment when Federal Reserve policymakers begin a two-day meeting later in the day. The market had been recovering from a tech-led bounce in the prior session, in which the S&P 500 recorded its largest single-day gain in over a month, an advance that coincided with Nvidia's closely watched annual developer conference.
Nvidia told investors the revenue opportunity for its artificial intelligence chips could reach at least $1 trillion through 2027 as the company laid out plans to pursue the market for real-time AI processing more aggressively. Following Monday's 1.6% gain, Nvidia shares were flat in premarket trading. Semiconductor peers Advanced Micro Devices and Broadcom were modestly lower in early trade.
Investors shifted attention to the geopolitical situation that has pushed crude toward the triple-digit mark, with concern that the conflict could keep the Strait of Hormuz effectively closed. U.S. President Donald Trump's appeals to allies to protect the waterway did not receive the response he sought, and market participants said the prospect of continued disruptions was weighing on sentiment.
Sectors showed a bifurcated response. Travel stocks were under pressure, with Delta and Carnival each down about 1%. Energy names gained: Occidental and EQT rose roughly 1% apiece. Several brokerages raised their price outlooks for energy, a move market participants said is likely to act as a drag on broader economic growth. The Australian central bank, which increased interest rates earlier in the day, also cited elevated energy costs as a factor when explaining its decision.
Policy expectations remain central to price action. The Federal Reserve is widely expected to maintain current borrowing costs when its meeting concludes on Wednesday. Still, traders appear to have adjusted to a firmer stance, with short-term Treasury yields rising and rate futures indicating a single 25-basis-point cut by year-end, down from about two cuts priced before the conflict began, according to LSEG-compiled data.
Analysts at UBS said of global central bank decisions this week: "While we do not expect central banks to make knee-jerk policy moves, policymakers are likely to stress vigilance over inflation risks amid elevated oil prices and uncertainty over the length of the war. Comments that are more hawkish than expected could inject further volatility into a market that is vulnerable to shifts in sentiment."
At 05:11 a.m. ET, futures were trading lower across the major U.S. contracts. Dow E-minis were down 104 points, or 0.22%. S&P 500 E-minis were down 20 points, or 0.30%. Nasdaq 100 E-minis were down 95.25 points, or 0.39%. Futures tied to the Russell 2000, an index that is sensitive to interest rates, slipped 0.7%. The CBOE volatility index, a gauge of market stress, inched up 0.57 points to 24.06.
Despite the conflict-driven turmoil, U.S. equities have so far shown more resilience than markets in Europe and Asia, driven by views that the economic fallout may be less severe domestically. Still, market participants and some senior executives have warned that the full economic consequences of the conflict may not yet be fully priced in. Goldman Sachs' CEO David Solomon was cited as emphasizing that investors have yet to fully factor in the war's potential impact on the global economy.
The geopolitical standoff has also had diplomatic implications. A planned summit between U.S. and Chinese leaders was delayed at President Trump's request, casting a pall over bilateral engagement that had been stable since their last meeting in October.
Among individual stocks, Uber climbed 2.3% after the company said it will deploy robotaxis in 28 cities starting next year using Nvidia's autonomous-driving software. Plant-based protein company Beyond Meat fell 6% after postponing its annual report; the firm also said its preliminary quarterly revenue missed analyst estimates.
Market tools and product offerings continue to be marketed to investors: ProPicks AI, a stock-selection engine, touted its capability to evaluate Nvidia among thousands of companies using more than 100 financial metrics. The service asserted that it applies algorithmic analysis to identify stocks with favorable risk-reward characteristics based on current data.
What this means for markets
- Geopolitical disruptions that keep oil near $100 per barrel increase the probability that inflation pressures persist, a central consideration for central banks this week.
- Tech sector momentum is vulnerable to switching sentiment as investors weigh high-profile corporate forecasts against rising macro risks.
- Rate-sensitive and travel sectors are showing immediate sensitivity to both inflation and conflict-related demand concerns, while energy producers are benefiting from higher crude expectations.