As Middle East peace talks remain unresolved, concerns over conflict with Iran and the Strait of Hormuz have resurfaced, halting the U.S. stock market's record-breaking rally. Meanwhile, Brent crude oil has climbed above $100 per barrel.
At the time of writing, Dow Jones Industrial Average futures fell 0.35%, S&P 500 futures declined 0.14%, and Nasdaq 100 futures dropped 0.14%.
Both S&P 500 and Nasdaq futures trended lower after hitting fresh records just the day before. S&P 500 futures retreated 0.14% following the index's eighth record close this year, extending its April gains to over 9%. Tech-heavy Nasdaq futures are projected to fall 0.1%, while Dow futures slipped 0.35%.
In pre-market trading, semiconductor stocks continued their strong performance. Texas Instruments led gains, surging 10% due to robust demand from data center builders. Software companies broadly declined after ServiceNow reported delays in deal closures due to geopolitical tensions. Tesla fell 3% after raising spending forecasts related to its artificial intelligence and robotics initiatives.
As earnings season continues, major companies including American Airlines Group, Lockheed Martin, and Intel are scheduled to report quarterly results on Thursday.
Emmanuel Cau, Head of European Equity Strategy at Barclays, commented: "The lack of progress in U.S.-Iran negotiations may introduce a reality check for equity markets following the strong rebound." He added, "Without clearer advances in the peace process, it's difficult to see significant further upside for stocks. Corporate earnings have been solid so far, providing fundamental support."
Despite initial disruptions that affected approximately 20% of global oil shipments due to Middle East tensions, U.S. stocks have largely shrugged off the impact. Renewed optimism around artificial intelligence combined with strong corporate results have fueled the market rebound, as investors maintain expectations for eventual conflict resolution.
The MSCI All-Country World Index has pulled back from record highs set last week. European equities fell 0.5%, marking their fourth consecutive daily decline—the longest losing streak since January. As a net importer of oil and gas, Europe remains more vulnerable to Middle East disruptions, with even strong corporate results failing to boost market sentiment. L'Oréal rose over 8% in Paris trading after reporting better-than-expected sales, while Nestlé gained 6% in Zurich.
Most Asian markets gave up early gains as Middle East tensions persisted and investors awaited updates on potential U.S.-Iran negotiations. Japan's Nikkei 225 briefly surpassed 60,000 points for the first time in history before reversing gains to close 0.75% lower. South Korea's Kospi index finished 0.9% higher after earlier advancing more than 2%.
Holger Schmieding, Chief Economist at Berenberg, noted: "Current market logic suggests that disruptions in the Strait of Hormuz would impact Asian and European economies more severely than the U.S. economy." He further stated, "This also implies that European and Asian markets would outperform the U.S. once the strait reopens."
In some of the earliest April economic data, eurozone business activity unexpectedly contracted for the first time this year. Later on Thursday, U.S. data will be closely watched for early signals on how rising oil prices are affecting the economy.
Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank, wrote: "Resilient economic data has been a key support for risk assets. Any change in this trend would be significant, as it would undermine one pillar explaining why recent geopolitical events haven't triggered more negative market reactions."
Geopolitical tensions remain elevated as the U.S. and Iran maintain their stalemate. The U.S. continues to blockade vessels linked to Iran, while Iran has attacked three ships attempting to traverse the Strait of Hormuz. Market participants are questioning whether the fragile ceasefire between the two nations can hold—an agreement that has supported the recent market rebound.
Brent crude rose 1.9% to around $104 per barrel as both the U.S. and Iran continue to restrict passage through the Strait of Hormuz. Beyond ship seizures, The Washington Post reported that Pentagon officials estimate mine clearance operations in the strait could take up to six months.
Charu Chanana, Chief Investment Strategist at Saxo, observed: "Markets appear highly tense. We remain in a 'no-war, no-peace' situation, meaning even unconfirmed escalation fears are enough to push oil prices higher and weigh on risk assets."
Soojin Kim, Analyst at Mitsubishi UFJ, added: "With little diplomatic progress and major geopolitical issues unresolved, markets are increasingly pricing in prolonged supply disruptions rather than treating them as short-term, headline-driven volatility."
U.S. Treasury yields climbed across the curve as oil prices rose. The two-year yield reached 3.81% during European trading, while the 10-year yield advanced to 4.32%. Joel Rossier of Danske Bank noted in a report: "Markets opened weakly as news headlines focused on the ongoing stalemate in the Strait of Hormuz."
Eurozone government bond yields also moved higher as fixed-income investors remained concerned about inflationary impacts from Middle East conflicts. According to Tradeweb data, Germany's 10-year yield rose 4 basis points to 3.037%, France's 10-year yield increased 5 basis points to 3.695%, and Italy's 10-year yield climbed 5.4 basis points to 3.825%.
Currency markets were relatively calm, with the U.S. dollar holding steady after modest overnight gains. The euro stabilized at $1.17, slightly above its 10-day low of $1.1691 after falling 0.3% previously. The risk-sensitive Australian dollar declined 0.2% to $0.7147 after several weeks of gains.
The nomination hearing for Kevin Warsh, President Trump's nominee for Federal Reserve Chair, is underway before the Senate Banking Committee.
Kit Juckes of Société Générale remarked: "We are in a state of suspension, as geopolitical conditions could shift dramatically in a short time. Until the situation becomes clearer, no one will have enough confidence to push markets too far."
Bitcoin turned lower after hitting an 11-week high on Wednesday. According to LSEG data, the cryptocurrency fell 0.3% to $78,225 after reaching $79,480 the previous day.
Gold prices declined during early European trading, falling below $4,700. In a high-interest-rate environment, non-yielding assets like gold often lose appeal. Soojin Kim of Mitsubishi UFJ commented: "Persistent inflation risks from prolonged energy shocks reinforce expectations that central banks will maintain higher rates for longer. Consequently, gold continues to face pressure."
Bank of America warned that Kevin Warsh's "selective use of data" could harm the Fed's credibility. During his Senate confirmation hearing, the nominee suggested changing how the central bank measures inflation, expressing preference for a "trimmed average" inflation metric over the traditional core PCE index.
Warsh stated: "My primary concern is determining the underlying inflation rate. We should exclude tail risks and one-off factors to assess whether broad price changes are having secondary effects on the economy." The trimmed average approach aims to filter out temporary noise by excluding the most extreme price movements each month.
Veteran Wall Street strategist Ed Yardeni suggested that while war risks persist, U.S. stocks are unlikely to revisit March lows. Having observed numerous market cycles, Yardeni believed selling pressure had peaked when the S&P 500 fell more than 9% from its high and political urgency to end Middle East conflicts grew. On March 31, he advised clients that the market correction had ended and later recommended buying battered tech stocks.
**Notable Movers:** - Texas Instruments surged nearly 11% pre-market following strong earnings, poised to open at a new high. - IBM fell nearly 7% pre-market despite Q1 revenue and profit beats, due to disappointing software growth. - Tesla dropped over 2% pre-market after missing Q1 revenue expectations and announcing higher-than-expected capital expenditures. - STMicroelectronics rose over 5% pre-market on better-than-expected Q1 results. - ASML declined over 2% pre-market after TSMC executives indicated no immediate plans to deploy its latest lithography machines. - Lockheed Martin fell nearly 7% pre-market after Q1 net sales missed estimates. - Honeywell dropped over 4% pre-market on weaker-than-expected Q1 sales. - Mobileye, an Intel subsidiary, jumped 12.7% pre-market after raising full-year revenue guidance. - Comcast gained 5% pre-market after reporting better-than-expected Q1 revenue. - Netflix advanced 1.6% pre-market after approving an additional $25 billion stock repurchase program. - Nokia surged over 11% pre-market following better-than-expected Q1 earnings.
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