Wall Street looked set to open lower on Thursday as rapidly rising crude oil prices and renewed tensions between the U.S. and Iran threatened to reverse Wednesday’s modest equity-market recovery.
U.S. crude futures jumped more than 3% to their highest level in nearly a month after President Donald Trump escalated his rhetoric against Tehran, raising concerns that the conflict could remain unresolved and continue disrupting global energy supplies.
Trump announced on Truth Social that Washington was launching “economic warfare” against Iran, describing the campaign as the “most crushing economic operation ever taken against any country.”
He also threatened “tremendous economic consequences” for any country that “allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran.”
Iran hits back as crude oil extends rally
Iranian Foreign Minister Abbas Araghchi responded to the U.S. president’s comments by describing the proposed “Economic D-Day” as a “diversion from America’s own crisis: unprecedented debt & surging interest costs.”
“Doubling down on failed policies will only bring further defeat—and enmity of Iranians,” Araghchi said in a post on X. “US economic terrorism threatens global economy and sovereignty worldwide.”
The increasingly confrontational language helped send U.S. crude futures sharply higher, with investors concerned that prolonged hostilities could maintain pressure on global energy supplies.
The oil rally has also pushed Treasury yields higher again, partially unwinding Wednesday’s substantial decline after the Treasury Department announced an expansion of its long-dated debt buyback operations.
Walmart slump adds another headwind for Wall Street
Walmart (NYSE:WMT) was among the biggest premarket movers, with shares plunging more than 7% following its latest quarterly update.
Investors reacted negatively to weaker-than-expected second-quarter comparable sales growth and guidance that fell short of market expectations.
The selloff in the retail heavyweight added another source of pressure for U.S. index futures following Wednesday’s modest rebound.
The Dow gained 119.65 points, or 0.2%, in the previous session to close at 53,463.05. The Nasdaq advanced 41.38 points, or 0.2%, to 26,331.09, while the S&P 500 climbed 16.22 points, or 0.2%, to 7,707.98.
Those gains followed three consecutive sessions of declines.
Treasury intervention provides temporary relief to bond markets
Wednesday’s recovery was helped by a sharp retreat in government bond yields, particularly at the longer end of the Treasury curve.
The 30-year yield moved away from levels not seen in almost two decades after the Treasury Department announced plans to at least double the size of liquidity-support buybacks involving longer-dated nominal coupon securities from September 9.
“This increase in buyback operation sizes reflects Treasury’s desire to provide greater liquidity support in longer-dated nominal sectors where there is consistent strong sponsorship from market participants,” the Treasury said in a statement.
While the announcement initially eased pressure across bond markets, the subsequent jump in oil prices has revived concerns that inflation could remain elevated and keep borrowing costs under upward pressure.
Fed minutes underline lingering inflation concerns
Federal Reserve minutes added another cautious element to the outlook after showing that many policymakers believe interest rates may need to rise if inflation does not continue moving towards the central bank’s 2% target.
Some officials also questioned whether existing financial conditions were sufficiently restrictive to bring price pressures sustainably under control.
The Middle East conflict was specifically identified as a potential inflation risk because of its impact on energy markets and global supply chains.
“[Many] participants remarked that a protracted conflict could prolong supply chain challenges and could put upward pressures on inflation,” the Fed said.
Policymakers voted 9-3 to keep interest rates unchanged at the July 28-29 meeting. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan favoured a quarter-point increase.
Those supporting tighter policy argued that an earlier move could reduce the possibility of requiring a more aggressive series of rate increases later.
Gold and biotech shares lead Wednesday’s sector gains
Wednesday’s session produced substantial differences in sector performance.
Gold miners were among the strongest performers as bullion prices rallied, sending the NYSE Arca Gold Bugs Index 9.3% higher to a three-month closing peak.
Biotechnology stocks also advanced strongly, with the NYSE Arca Biotechnology Index gaining 4.2%. Pharmaceutical, healthcare and housing stocks recorded sizeable increases as well.
Computer hardware, banking and semiconductor shares moved in the opposite direction, suffering notable declines.
Investors now face a combination of sharply higher energy prices, renewed Treasury yield volatility and a Federal Reserve that remains concerned about inflation, leaving Wall Street vulnerable to another risk-off session.
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