Wall Street's main indexes are poised to open lower on Thursday, driven by a surge in crude oil prices due to escalating Middle East hostilities, which has reignited inflation concerns and prompted the Federal Reserve to adopt a more cautious stance on interest rate cuts.
Strong forecasts from Micron Technology had little effect in boosting market sentiment, with its shares falling 5% in premarket trading as investors considered the chipmaker's increased spending plans amid rising borrowing costs.
Other memory chip stocks that rallied this year also faced pressure. SanDisk dropped 5.2%, Western Digital declined 2.7%, while AI leader Nvidia fell 0.9%.
Brent crude prices reached $115 per barrel after Iran attacked energy facilities across the Middle East in retaliation for Israeli strikes on its South Pars gas field. However, the discount of U.S. benchmark crude to Brent widened to its largest in 11 years, due to releases from the U.S. strategic reserve and rising shipping costs.
The Federal Reserve held interest rates steady on Wednesday, with Chair Jerome Powell signaling higher future inflation. He added that it was too early to assess the economic impact of the war and maintained his previous forecast for one 25-basis-point rate cut this year.
"Oil prices are now a driver not only of stock prices but also of Fed policy," said Dennis Follmer, Chief Investment Officer at Montis Financial, in a note. "While this may be a short-term phenomenon, it is what the market is currently grappling with."
Morgan Stanley joined Goldman Sachs and Barclays in delaying its rate cut forecast from June to September. Traders are no longer pricing in rate cuts for this year, with LSEG data now pointing to dovish moves only by mid-2027.
At 8:40 a.m. ET, Dow E-minis were down 290 points, or 0.63%, S&P 500 E-minis fell 42 points, or 0.63%, and Nasdaq 100 E-minis dropped 172.75 points, or 0.71%.
Futures tracking the interest-rate-sensitive Russell 2000 index fell more than 1%, down 10% from its record high. A 10% decline from a record close is considered a correction.
Following the Fed's decision, both stocks and bonds declined, with the Dow and Nasdaq falling below their 200-day moving averages, while the benchmark S&P 500 hit a four-month low, coming close to breaching its own long-term moving average. The 200-day moving average is a technical indicator reflecting long-term momentum.
Investors will closely monitor comments from policymakers later in the day.
Meanwhile, weekly jobless claims unexpectedly fell last week, indicating stable labor market conditions and a rebound in employment growth in March.
Also in focus will be a U.S.-Japan summit, where U.S. President Donald Trump may seek assistance in pressuring Iran over the war, after earlier calls for allies to help secure the strategic Strait of Hormuz went unanswered.
Energy-sensitive travel stocks like Delta Air Lines and United Airlines fell more than 1%, while cruise operators such as Norwegian Air and Carnival declined 0.5%.
Rising rate expectations and a stronger U.S. dollar weighed on precious metal prices, causing miners such as Gold Fields and Endeavour Silver to drop 10%.
Tesla Motors shares fell 1.5% as the National Highway Traffic Safety Administration intensified its investigation into millions of the automaker's vehicles.
Uber surged 9% after announcing an investment of up to $1.25 billion in electric vehicle maker Rivian.
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