Futures tied to Wall Street's principal indexes fell on Thursday after the U.S. President signaled a stepped-up military campaign against Iran, dampening investor expectations for a swift end to the month-long conflict and contributing to a roughly 6% jump in crude oil prices.
In an address to the nation, the President said military operations would be intensified in the next two to three weeks. The statement followed an earlier remark a day prior in which he said the U.S. would be "out of Iran pretty quickly." The ambiguity about timing and objectives has weighed on market sentiment following a turbulent March that saw the benchmark S&P 500 record its largest monthly decline in a year while Brent crude logged its strongest monthly performance on record.
Crude prices were last reported around $107 a barrel as oil markets reacted to the prospect of broader or sustained conflict. The jump in energy costs intensified concerns that higher inflation could slow economic growth and complicate the outlook for monetary policy.
Interest-rate futures have adjusted expectations for the Federal Reserve, with LSEG-compiled data showing traders now anticipate the Fed will keep interest rates unchanged for much of the year. That view contrasts with market pricing before the conflict, which had included at least two 25 basis point rate cuts later in the year. At one point last month, uncertainty tied to the conflict had led investors to price in nearly a 50% chance of a rate hike.
At 3:05 a.m. ET, Dow E-minis were down 551 points, or 1.18%, while S&P 500 E-minis were down 86.75 points, or 1.31%. Nasdaq 100 E-minis declined 379 points, or 1.57%.
Smaller, more rate-sensitive and growth-oriented benchmarks also weakened: futures tracking the Russell 2000 fell nearly 2%. The CBOE VIX, Wall Street's so-called fear gauge, spiked 2.1 points to 26.68 after having fallen to a more than one-week low during the prior two sessions when expectations for an end to the fighting had supported risk-taking.
Investor flows shifted toward traditional safe-haven positions, with demand growing for the U.S. dollar, while some other conventional havens such as precious metals underperformed.
Separately, market attention was on developments in the aerospace sector after reports that SpaceX has confidentially filed for a U.S. initial public offering and is expected to target a $1.75 trillion valuation. The filing catalyzed rallies in smaller industry peers on Wednesday, with companies such as Rocket Lab, Planet Labs and Intuitive Machines seeing gains as investors anticipated renewed interest in the space sector.
Looking ahead, comments from Dallas Fed President Lorie Logan later in the day were singled out as potentially informative for the interest-rate outlook. Economic data to watch included the weekly initial jobless claims report and the March non-farm payrolls report due on Friday; however, U.S. equity markets will be closed on Friday for the Good Friday holiday.
Market participants face a combination of geopolitical uncertainty, elevated energy prices and shifting monetary policy expectations that have driven recent volatility across equities, fixed income and commodities. These dynamics are likely to remain central to trading and portfolio positioning in the near term.
Note: Market data and quotes referenced reflect the situation as reported during the session described.