Key facts
- Oil prices surpassed $100 a barrel for the first time since July amid escalating Middle East conflict.
- U.S. stock index futures were subdued as investors awaited inflation data.
- The U.S.-Iran conflict is impacting oil prices and inflation.
- Markets see a 60.4% chance of a 25 bps interest rate hike by the Federal Reserve next week.
- Brent crude futures rose 2.06% to $99.94 a barrel.
- Chipmakers saw gains in premarket trading.
- Key U.S. inflation data, CPI and PPI, are due later this week.
U.S. stock index futures were subdued on Wednesday as oil prices surpassed $100 a barrel for the first time since July amid an intensifying Middle East conflict, keeping investors cautious ahead of inflation data later this week.
Investors have struggled to look past the U.S.-Iran conflict, which has raised the risk of a broader regional conflict, owing to its impact on oil prices and inflation. Federal Reserve Chair Kevin Warsh's focus on controlling prices has also led traders to expect an interest rate hike this month. Markets now see a 60.4% chance that rates will be increased by 25 basis points when the central bank meets next week.
Morgan Stanley analysts, led by chief U.S. equity strategist Mike Wilson, wrote that higher oil and rates remain the main risks to equities in the near term. Brent crude futures were last up 2.06% at $99.94 a barrel after breaching the $100 mark earlier in the session.
Gains in tech stocks have helped offset some concerns, as investors spooked by economic risks have sought refuge in the AI theme. Chipmakers such as Qualcomm, Arm Holdings and Nvidia rose between 0.16% and 1.73% in premarket trading. Still, concerns about circular deals have kept some investors cautious, as companies at the heart of the AI boom turn to financing each other.
Anthony Saglimbene, chief market strategist at Ameriprise Financial, said investors should expect these deals to eventually support a consistent flow of higher revenue for the parties involved, but if not, markets may become exposed to a tangled web of risks.
At 5:05 a.m. ET, Dow E-minis were down 84 points, or 0.16%, S&P 500 E-minis were flat and Nasdaq 100 E-minis inched 12 points, or 0.04%, higher. Investors will also eye the U.S. Treasury's buyback announcement later in the session, weeks after the department said it would buy more longer-dated bonds to curb the rise in yields. J.P.Morgan analysts noted that some market participants are looking to this announcement for confirmation on the size Treasury will buy.
The Consumer Price Index report due on Friday and the Producer Price Index reading on Thursday will also be eyed for clues on the Fed's rate outlook. Glenmede strategists wrote that this week's CPI report is the most consequential data point before the Fed's September meeting, the last inflation reading policymakers will see before deciding on rates.