U.S. stock index futures weakened on Wednesday evening as global crude prices climbed sharply on reports of attacks on shipping near the Strait of Hormuz, raising fresh worries about potential oil supply disruptions.
By 20:34 ET (00:34 GMT) S&P 500 Futures had fallen 0.9% to 6,721.75 points, while Nasdaq 100 Futures were down 0.9% at 24,760.75 points. Dow Jones Futures dropped about 1% to 46,964.0 points.
In regular trading earlier in the session, U.S. equity benchmarks were mixed to lower: the Dow Jones Industrial Average slipped 0.6%, the S&P 500 ended 0.1% lower, and the NASDAQ Composite eked out a 0.1% gain.
Oil surge after fresh incidents in the Persian Gulf
Oil prices moved sharply higher, gaining more than 7% during Asian trading on Thursday after media reports indicated two international oil tankers were attacked in the northern Persian Gulf near Iraq and Kuwait. The incidents came after a string of recent attacks on vessels transiting the Strait of Hormuz, deepening concerns that shipments through this vital corridor could be further disrupted.
Prices climbed even though international and U.S. authorities had announced releases from strategic reserves in an effort to steady markets. The International Energy Agency agreed to release 400 million barrels from emergency reserves, and U.S. President Donald Trump said the United States would release roughly 172 million barrels from the Strategic Petroleum Reserve. Despite these measures, officials in Iran warned that the world should prepare for crude prices as high as $200 per barrel if hostilities and shipping disruptions escalate.
Inflation readings and policy-sensitive indicators in focus
Investors digested the latest U.S. inflation data on Wednesday. The Consumer Price Index rose 0.3% in February from the prior month, leaving annual inflation at about 2.4% - a result broadly in line with economists' expectations. While this suggests inflationary pressures were steady in the latest reading, market participants remained wary that higher energy costs could spill into future inflation measures.
Markets are now awaiting two additional data points that could shed light on labor-market conditions and price dynamics: weekly initial jobless claims due on Thursday, and the Personal Consumption Expenditures Price Index - the Federal Reserve's preferred inflation gauge - scheduled for release on Friday. These releases are likely to factor into assessments of the U.S. economy and the future path of monetary policy.
Market implications and near-term outlook
The combination of a renewed rise in crude prices and the timing of key U.S. economic data has produced a cautious tone among traders. The immediate driver of equity futures was the risk of further supply interruptions in global energy markets, while the upcoming labor and PCE reports will be watched for signals on inflation momentum and potential policy responses.
Given the current information, market participants appear to be balancing the effects of emergency reserve releases against the risk of renewed disruptions to oil flows through a strategically important transit route. The coming data releases will be central to whether equity markets regain traction or remain under pressure from energy-driven uncertainty.
Key points
- U.S. equity futures dropped Wednesday evening as oil prices surged on reports of tanker attacks near the Strait of Hormuz.
- Oil rose more than 7% in Asian trading after reports of attacks on two international tankers in the northern Persian Gulf near Iraq and Kuwait.
- Investors are monitoring CPI, weekly jobless claims, and the upcoming PCE release, which could influence inflation expectations and the outlook for monetary policy.
Risks and uncertainties
- Further disruptions to shipping through the Strait of Hormuz could exacerbate global oil supply concerns and put upward pressure on energy costs - a direct risk to the energy sector and broader markets.
- Higher oil prices have the potential to feed into future inflation readings, creating uncertainty for monetary policy decisions that affect financial markets.
- Upcoming labor-market and PCE data introduce near-term uncertainty about the strength of the U.S. economy and the Federal Reserve's policy path.