US stock futures continued to retreat on Wednesday as escalating Israel-Iran tensions fanned worries about a wider Middle East conflict, prompting caution in the market.
Futures on the Dow Jones Industrial Average (YM=F) pulled back 0.3%, while S&P 500 future (ES=F) dropped roughly 0.2%, as investors braced for Israel’s promised retaliation for a massive missile attack by Iran. Contracts on the tech-heavy Nasdaq 100 (NQ=F) were about 0.1% lower.
Stocks have kicked off October under pressure as geopolitical concerns grip the market, dispelling the upbeat mood around hopes for US interest-rate cuts. At the same time, oil has extended a surge that saw prices spike over 5% on Tuesday, the most in almost a year.
Brent crude (BZ=F) and West Texas Intermediate (CL=F) futures were both up around 3% on Wednesday, with traders paying a premium amid the prospect of risks to supply from heightened Israel-Iran attacks.
In focus are the chances the run-up in oil prices could push up US inflation, disrupting the progress made by the Federal Reserve. At the same time, Mideast tensions and the US port strike risk hampering supply chains, spurring concerns about the US economy — just when investors were becoming confident in a “soft landing.”
Given that, a reading on ADP private payrolls due later Wednesday is likely to feed into expectations for Fed rate cuts, in the wake of mixed data around job openings and ahead of the crucial September jobs report on Friday.
Read more: What the Fed rate cut means for bank accounts, CDs, loans, and credit cards
Meanwhile, Nike (NKE) shares slid 5% in premarket after the sport shoe giant withdrew its outlook for the year, having fallen short on first quarter revenue. “We have yet to turn the corner,” its CFO told analysts on a conference call.
