July 9 - U.S. stock index futures moved modestly higher on Thursday as oil prices retreated and global markets sought calmer footing after a fresh round of military action heightened geopolitical concerns. The moves followed U.S. military strikes aimed at keeping the Strait of Hormuz open to shipping, and subsequent attacks by Iran on Kuwait and Bahrain that intensified the confrontation and could undermine fragile efforts to end a four-month conflict.
The escalation unfolded hours after President Donald Trump said he believed an interim ceasefire with Iran was "over." Oil futures eased about 1% on Thursday, stepping back from two-week highs reached in the wake of the president's comments.
"We have held the view that the path toward a lasting peace deal is likely to be bumpy, with periodic flare-ups in tensions potentially triggering bouts of market volatility. But we also believe that both sides remain incentivized to keep the Strait of Hormuz open," said Mark Haefele, chief investment officer at UBS Global Wealth Management.
By 5:27 a.m. ET, futures trading showed modest gains for U.S. contracts: Dow E-minis were up 14 points, or 0.03%, S&P 500 E-minis were up 14 points, or 0.19%, and Nasdaq 100 E-minis were up 186 points, or 0.63%.
The renewed tensions forced investors to rethink recent optimism that a resolution to the conflict could bolster risk assets. In regular trading on Wednesday, the S&P 500 and the Dow finished lower, while the Nasdaq managed a slim gain.
Although lower crude benchmarks on Thursday helped steady market sentiment, investors remained vigilant about the inflationary risk that could arise from any prolonged disruption to Middle East energy routes.
Monetary policy backdrop
Under new Chair Kevin Warsh, the Federal Reserve held interest rates steady at its June meeting. Minutes released on Wednesday indicated that a minority of policymakers saw a case for raising borrowing costs before the committee ultimately agreed to maintain the current stance.
"While policymakers are likely to maintain their hawkish stance for a while longer, the rhetoric should start to soften once they are more confident that second-round inflation effects are limited," Haefele said.
Traders are pricing in at least one rate hike by the end of the year, according to LSEG data.
What investors are watching next
- Weekly jobless claims data, due at 8:30 a.m. ET, for further signals on labor market health.
- Remarks from New York Fed President John Williams later in the day.
In premarket trading, Levi Strauss slipped 6% despite raising its annual sales forecast.
Market participants continue to balance geopolitical uncertainty, energy price movements and monetary policy signals as they weigh exposure to risk assets and sectors sensitive to commodity prices and interest rates.