BY COMFORT OGBONNA
U.S. stock index futures declined on Thursday as global oil prices surged amid escalating conflict in the Middle East, renewing concerns that rising energy costs could push inflation higher and delay potential interest rate cuts from the Federal Reserve. The sharp jump in crude prices added new uncertainty for investors already navigating a cautious economic outlook and tighter financial conditions.
Despite strong earnings guidance from chipmaker Micron Technology, overall market sentiment remained weak. The company issued a robust forecast fueled by continued demand for memory chips tied to artificial intelligence and data center growth. However, investors reacted negatively to Micron’s plans for increased capital spending at a time when borrowing costs remain elevated. The stock dropped roughly 5.9% in premarket trading as concerns grew that higher investment outlays could pressure profitability in the near term.
Other companies in the memory chip sector also saw declines as traders locked in gains after strong rallies earlier in the year. Shares of SanDisk fell about 5.5%, while Western Digital slipped nearly 3%. Even artificial intelligence powerhouse Nvidia experienced mild pressure, with its shares edging down slightly in early trading.
Energy markets were at the center of investor concerns. Brent crude prices climbed sharply, briefly reaching around $115 per barrel after Iran launched attacks on energy infrastructure across the Middle East in response to Israel’s strike on the South Pars gas field. The escalation intensified fears of broader disruptions to global energy supplies. Meanwhile, the U.S. oil benchmark continued trading at a significant discount to Brent crude, the widest gap in more than a decade. Analysts attribute the spread to large releases from U.S. strategic petroleum reserves and increased transportation costs affecting American crude exports.
The surge in oil prices has reignited fears of persistent inflation, particularly as energy costs feed into transportation, manufacturing, and consumer prices. This development comes just after the Federal Reserve decided to leave interest rates unchanged during its latest policy meeting. Federal Reserve Chair Jerome Powell warned that inflation pressures could increase in the near term, noting that it remains too early to determine the full economic impact of the conflict in the Middle East.
Powell reaffirmed the central bank’s cautious outlook, signaling that policymakers still expect only one quarter-percentage-point interest rate cut this year. The statement underscored the Federal Reserve’s careful balancing act as it attempts to control inflation without triggering a major economic slowdown.
Several major financial institutions have already begun adjusting their expectations for monetary policy. Analysts at Morgan Stanley pushed their forecast for the first rate cut back to September, aligning with similar revisions by Goldman Sachs and Barclays. Market data compiled by the London Stock Exchange Group suggests that traders are increasingly skeptical about the likelihood of rate cuts this year, with some projections now pointing toward potential easing only in mid-2027.
Economists say the Federal Reserve’s ability to respond to energy-driven inflation is limited. Bill Adams, chief economist at Comerica Bank, said the central bank may not be able to shield the economy from the consequences of an energy shock.
According to Adams, monetary policy tools can influence economic growth and inflation by adjusting borrowing costs, but they cannot directly resolve supply disruptions in global energy markets. Such shocks can simultaneously slow economic activity while pushing prices higher, creating a challenging environment for policymakers.
By early morning trading in New York, futures linked to the Dow Jones Industrial Average were down about 58 points, or 0.13%. Futures tied to the S&P 500 slipped 0.20%, while those connected to the Nasdaq-100 dropped roughly 0.34%. The declines followed a broader selloff in both stocks and bonds after the Federal Reserve’s policy announcement.
Major indexes have also shown signs of technical weakness. Both the Dow Jones and the Nasdaq Composite have fallen below their 200-day moving averages, a widely watched indicator of long-term market momentum. Meanwhile, the S&P 500 recently touched a four-month low and is approaching its own long-term trend line, increasing concerns that markets could face additional volatility if economic or geopolitical conditions deteriorate further.
Investors will now be watching closely for further comments from policymakers later in the day, as well as new economic data including the weekly U.S. jobless claims report. The figures could offer fresh insight into the strength of the labor market and the broader economy.
Geopolitics will also remain a major focus for markets. A high-level summit between the United States and Japan is expected to take place soon, where President Donald Trump may seek additional international cooperation related to the ongoing conflict involving Iran. Washington has previously urged allies to help safeguard shipping routes through the critical Strait of Hormuz, a key channel for global oil transport.
Rising fuel costs have already begun affecting sectors that are highly sensitive to energy prices. Airline stocks including Delta Air Lines and United Airlines traded modestly lower as investors weighed the potential impact of higher jet fuel costs. Cruise operators such as Norwegian Cruise Line Holdings and Carnival Corporation also slipped slightly in early trading, reflecting concerns that increased operating expenses could pressure travel demand and profit margins.
With geopolitical tensions rising and inflation fears returning, financial markets appear set for a period of heightened uncertainty. Investors are likely to remain cautious as they monitor developments in the Middle East, shifts in energy prices, and signals from central banks about the future path of interest rates.
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