U.S. equity futures traded lower on Thursday, while oil prices advanced, after a fresh round of military strikes between the United States and Iran reignited concerns over stability in the Gulf and reduced optimism surrounding a possible peace agreement. Investors were also focused on upcoming U.S. inflation data closely watched by the Federal Reserve.
At 03:37 ET, futures tied to the Dow Jones Industrial Average were down 53 points, or 0.1%. S&P 500 futures declined 11 points, also down 0.1%, while Nasdaq 100 futures lost 99 points, equivalent to 0.3%.
The weaker tone followed a relatively positive session on Wall Street the previous day, when major indices managed modest gains amid lingering expectations that diplomatic talks between Washington and Tehran could still progress.
Analysts at Vital Knowledge said markets continue to price in the possibility that a resolution to the conflict may emerge soon. However, sentiment deteriorated after the White House rejected as “a complete fabrication” reports aired by Iranian state television regarding an alleged draft Memorandum of Understanding.
Consumer Shares Hold Up While Energy and Tech Stocks Lose Momentum
Earlier support for equities had come from softer Brent crude prices and stronger-than-anticipated earnings from retailers including Abercrombie & Fitch and Bath & Body Works.
Vital Knowledge analysts said those developments, together with what they described as “sanguine” commentary from companies attending a major investor conference, helped support consumer discretionary stocks.
At the same time, energy stocks came under pressure, while investors locked in gains from several high-performing technology shares that had rallied sharply in recent weeks.
Escalating Military Action Raises Concerns Over Ceasefire Durability
Geopolitical tensions intensified again after reports emerged that the U.S. military conducted additional strikes inside Iran on Wednesday following Iranian drone attacks against commercial shipping in the Strait of Hormuz.
According to the Wall Street Journal, citing officials familiar with the situation, U.S. forces destroyed a drone and targeted a drone-control facility near the Iranian port city of Bandar Abbas.
A U.S. official told Reuters that the operations were “measured, purely defensive and intended to maintain” the fragile ceasefire currently in place.
Iran’s Islamic Revolutionary Guard Corps later claimed responsibility for strikes against a U.S. military base and warned that any additional attacks would trigger retaliation.
Meanwhile, Kuwait’s military confirmed that it had intercepted incoming drones and missiles, ending a period of relative calm that had lasted for several weeks.
Oil Prices Advance as Supply Risks Remain Elevated
Efforts to secure a diplomatic solution to the conflict continued but failed to produce an immediate breakthrough, with negotiations still hindered by disagreements over Iran’s nuclear programme and tensions surrounding the Strait of Hormuz.
Against that backdrop, Brent crude climbed 2.8% to $96.95 per barrel. Although prices remained below the psychologically important $100 level, they continued to trade significantly above pre-conflict levels.
Disruptions around the Strait of Hormuz have fuelled concerns about global energy supplies, helping to drive oil prices higher and increasing fears of renewed inflationary pressure worldwide. Roughly one-fifth of global oil and liquefied natural gas shipments pass through the strategic waterway.
Investors Await Key U.S. Inflation Reading
Attention is now turning toward the release of the U.S. personal consumption expenditures (PCE) price index for April, one of the Federal Reserve’s preferred measures of inflation.
Economists expect annual headline PCE inflation to accelerate to 3.8% from 3.5%, while the monthly reading is forecast to ease to 0.5% from 0.7%.
Core PCE inflation, which excludes food and energy prices, is projected to edge up to 3.3% year-on-year while remaining unchanged month-on-month at 0.3%.
Recent remarks from Federal Reserve officials have highlighted growing divisions within the central bank over the future direction of interest rates, particularly amid concerns about the inflationary impact of rising energy costs.
Markets are increasingly pricing in the possibility that the Fed and other major central banks may need to resume rate hikes if inflation pressures continue to build.
Musk Clarifies Terms of SpaceX-Anthropic Computing Partnership
Separately, Elon Musk said Thursday evening that SpaceX’s agreement with artificial intelligence startup Anthropic to provide computing capacity is currently based on a short-term arrangement rather than a multi-year commitment.
Earlier disclosures from SpaceX had suggested the agreement would give Anthropic access to computing resources at the Colossus data centre through May 2029.
Responding to social media commentary, Musk said “SpaceX has not committed to leasing Colossus for years, although it’s possible that may be what happens.”
He added that the deal currently consists of a 180-day lease with a 90-day mutual cancellation clause thereafter. According to Musk, SpaceX specifically requested the shorter-term structure to preserve flexibility in case the company later requires additional internal computing resources.
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