U.S. equity futures moved modestly lower early Friday as energy prices remained elevated amid the continuing conflict in the Middle East. Brent crude stayed above the $100-per-barrel threshold, with little indication that the joint U.S.-Israeli campaign against Iran — now stretching beyond a week — will ease soon. The jump in energy costs has also raised fresh inflation concerns, putting gold on track for a weekly decline, while investors await another key U.S. inflation reading. In corporate news, Adobe (NASDAQ:ADBE) shares slipped after the company announced that its long-serving chief executive will step down.
Futures drift lower
Contracts tied to the major U.S. stock indices pointed to a softer start for Wall Street on Friday, suggesting markets may finish the week under pressure following several sessions of volatility linked to the Iran war and tightening oil supplies.
At 04:10 ET, Dow futures were down 241 points, or 0.5%. S&P 500 futures had fallen 35 points, also about 0.5%, while Nasdaq 100 futures were lower by 157 points, or 0.6%.
The main U.S. benchmarks had already ended the previous session lower as investors saw little evidence that tensions in the Middle East were about to subside. A statement from Iran’s new Supreme Leader Mojtaba Khamenei indicating that the crucial Strait of Hormuz will remain closed helped keep oil prices elevated and weighed on investor sentiment.
Although the U.S. and Israel appear to have gained the upper hand militarily, some analysts believe Iran may be trying to counter the pressure by restricting maritime traffic through the strait, which carries roughly one-fifth of global oil shipments.
To offset Iran’s control over the key passage, the U.S. Treasury has said countries will be allowed to buy certain sanctioned Russian crude until April 11. Treasury Secretary Scott Bessent also said the U.S. Navy may escort commercial ships traveling through the strait.
Brent remains elevated
Fears that the conflict could spread across one of the world’s most important oil-producing regions have helped keep Brent crude above $100 per barrel.
The benchmark has experienced sharp swings throughout the week. At one stage, Brent surged close to $120 a barrel before briefly falling below $90.
While the volatility has captured headlines, the bigger question for investors is whether the surge in oil prices will prove lasting, analysts at Capital Economics noted.
“As it stands, investors in the options market put a one-in-five chance of Brent crude prices being $100 per barrel or higher in three months’ time,” said Kieran Tompkins, Senior Climate and Commodities Economist at Capital Economics, in a note.
At 04:33 ET on Friday, Brent futures had gained 0.6% to $101.04 a barrel, putting the benchmark up more than 9% over the past week. Before the conflict with Iran erupted, Brent had been trading near $70 a barrel.
Gold heads for weekly loss
Spot gold was meanwhile poised for a second consecutive weekly decline, highlighting concerns that the Iran conflict could trigger a fresh wave of inflation through higher energy costs.
Much of the oil and gas transported through the Strait of Hormuz is used in manufacturing products such as fertilizers and plastics. A sustained rise in energy prices could therefore ripple through supply chains and increase inflationary pressures across global economies.
Such concerns could also prompt central banks — including the Federal Reserve — to reconsider plans for near-term interest rate cuts. Higher borrowing costs tend to attract foreign capital and support the U.S. dollar. The dollar index, which tracks the currency against a basket of major peers, has strengthened as the conflict has intensified.
Although gold is typically viewed as a safe-haven asset during geopolitical crises, a stronger dollar can reduce its appeal by making bullion more expensive for buyers outside the United States.
U.S. inflation data ahead
Markets will also be watching closely for the release of the U.S. personal consumption expenditures price index for January later on Friday.
Excluding volatile categories such as food and energy, the so-called “core” PCE index is expected to rise 3.1% year-on-year, slightly higher than the 3.0% recorded in December. The gauge is closely followed by financial markets because it is one of the Federal Reserve’s preferred indicators when shaping monetary policy.
Interestingly, the Commerce Department’s PCE figures have recently come in hotter than the Labor Department’s consumer price index readings. The difference largely reflects variations in weighting — particularly for housing and healthcare — as well as differences in scope and consumer substitution patterns. Specifically, the lower weighting of cooling housing costs in the PCE and its higher exposure to rising healthcare expenses have kept the PCE above CPI.
On Wednesday, February’s CPI data showed relatively moderate inflation of 2.4% year-on-year.
However, the data largely reflect a period before the outbreak of the Iran conflict, which began with U.S. and Israeli air strikes in late February. Since then, the inflation outlook has become more uncertain.
Adobe CEO to step down
Adobe shares declined in after-hours trading after the company revealed that Shantanu Narayen — who has served as chief executive for eighteen years — will step down as the board begins the process of identifying a successor.
Narayen joined Adobe in 1998 and rose through the company before becoming CEO in December 2007. One of his most notable strategic decisions was transitioning Adobe’s software portfolio to a cloud-based subscription model.
During his leadership, Adobe’s annual revenue expanded sharply, rising from $3.58 billion to $23.77 billion.
The San Jose, California-based firm — known for products such as image editor Photoshop and video editing software Premiere Pro — also reported quarterly results that exceeded expectations on both revenue and earnings and issued guidance for the current quarter that was largely above market forecasts.
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