Wednesday was rough. Dow dropped 580 points. Iran situation escalated again. Trump said the US would probably strike Iran again. Futures overnight managed to stabilize but nobody is relaxed heading into Thursday.
S&P 500 Falls as Iran Tensions Escalate
Dow fell 580 points on Wednesday. That is 1.1% down in a single session. S&P 500 lost 0.3%. Nasdaq actually managed a 0.2% gain thanks to Nvidia and a few other chip names finding buyers.
US carried out fresh strikes on Iran in response to attacks on commercial shipping near the Strait of Hormuz. Markets reacted to that with immediate selling. Oil moved higher. Inflation concerns came back fast. That is the chain that keeps repeating every time the Middle East situation flares up again.
Then Trump said the US would probably strike Iran again later that night. Markets do not like the word probably in that sentence. Probably means nobody knows what comes next. Nobody knowing what comes next is not an environment where traders want to hold risk overnight.
S&P 500 Today Turn Slightly Positive
Despite all of that Wednesday evening S&P 500 futures edged up 0.1% by Thursday morning. Dow futures added about 70 points. Nasdaq futures up 0.1%. Small moves but at least in the right direction.
Asia helped the mood somewhat. South Korea Kospi rebounded 3% after falling into bear market territory the previous session. Kosdaq climbed 3.8%. Japan Nikkei gained 2%. Some relief buying across the region after several sessions of heavy selling.
South Korea going from bear market to 3% bounce in 24 hours illustrates how volatile this market has become. Swings of that magnitude in a major index in consecutive sessions are not normal. They reflect genuine uncertainty about direction rather than any clear trend.
Rising Oil Prices Increase Inflation Concerns
WTI crude added nearly 1% Thursday morning continuing its climb. Energy markets are staying on alert given the ongoing situation in the Strait of Hormuz. That waterway handles roughly 20% of global oil supply and every new military exchange raises questions about how long commercial shipping can operate normally through it.
Higher oil feeds directly into inflation. Higher inflation gives the Fed less room to consider rate cuts and more reason to consider rate hikes. That dynamic has been pressuring growth stocks and keeping bond yields elevated. It does not resolve quickly. Oil moves on supply disruption fears can persist for weeks even if actual disruptions are limited.
Fed Minutes Show Policymakers Remain Divided
Fed minutes from the June meeting dropped Wednesday. Confirmed what the hawkish dot plot already suggested but added texture. Policymakers appeared divided and reluctant to ease policy until they see strong evidence inflation is genuinely moving back toward the 2% target.
No clear consensus on timing of the next move. Some members leaning toward a hike if data stays hot. Others wanting to hold longer before acting. Warsh’s shorter statement format carried through to shorter minutes too. Less detail than markets got used to under Powell.
For markets the key takeaway is that rate cuts are not coming anytime soon and a hike is a live possibility. Fresh oil price increases from Iran situation add to that concern because energy prices feeding into inflation give hawks on the committee more ammunition.
Jobless Claims Could Drive the Next Market Move
Weekly jobless claims report lands Thursday. Closely watched snapshot of the labor market. After June’s surprisingly weak nonfarm payrolls showing only 57,000 jobs added the labor market data has become more important.
If claims come in higher than expected it suggests hiring is cooling further. That reduces Fed hike pressure and gives markets some relief. If claims stay low it signals the labor market is still tight which keeps inflation risk elevated.
Between Iran headlines and economic data Thursday has enough catalysts to move things in either direction. Futures being barely positive is not a strong signal. More like traders sitting on their hands waiting to see what lands first.