US stock index futures edged lower on Thursday as escalating tensions between the United States and Iran weighed on investor sentiment ahead of a closely watched inflation report that could influence interest rate expectations.
Tehran targeted a US airbase after Washington launched fresh strikes, adding to geopolitical uncertainty.
The move came hours after President Donald Trump rejected reports suggesting he was close to reaching a compromise agreement with Iran.
The developments pushed oil prices higher and renewed concerns about inflationary pressure, particularly as the continued closure of the Strait of Hormuz threatened global energy supplies.
At 04:54 am ET, Dow E-minis fell 53 points, or 0.1%.
S&P 500 E-minis declined 6.75 points, or 0.09%, while Nasdaq 100 E-minis dropped 63.5 points, or 0.21%.
Oil prices rise as geopolitical tensions intensify
Oil prices climbed more than 2% following the latest developments in the Middle East.
US Treasury yields also moved higher as investors assessed the impact of rising energy prices on inflation.
The closure of the Strait of Hormuz continued to add to market anxiety, with traders monitoring the possibility of prolonged disruptions to energy flows.
Investors are now turning their attention to the personal consumption expenditures data due later in the day.
The report includes the Federal Reserve’s preferred inflation gauge and is expected to provide further clues on the central bank’s monetary policy direction under new chair Kevin Warsh.
Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, said a stronger-than-expected inflation reading could increase expectations for tighter monetary policy.
Money markets currently expect the Federal Reserve to keep rates unchanged for the remainder of the year, though traders are still pricing in some possibility of a 25-basis-point rate hike in December.
AI optimism and earnings support market rally
Despite Thursday’s weaker futures, Wall Street has continued to benefit from optimism surrounding artificial intelligence and strong earnings growth momentum.
All three major US indexes closed at record highs on Wednesday, extending the recent market rally.
The S&P 500 was also on track for a ninth straight weekly gain, marking its longest winning streak since December 2023.
Marvell and HP decline after earnings
Among premarket movers, shares of Marvell Technology fell 2.2% after the company reported first-quarter results.
The stock has more than doubled so far this year.
Meanwhile, HP slipped 1.4% following its second-quarter results.
The company warned that rising memory costs were expected to pressure margins.
Drone stocks jump on funding report
Drone-related companies rallied after the Wall Street Journal reported that the Trump administration was in discussions to fund drone firms.
Shares of Unusual Machines surged 33% in premarket trading.
AeroVironment gained 9.1%, while Kratos Defense & Security Solutions rose 11.2%.
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