Global markets staged a broad rebound on Wednesday as volatility in oil prices moderated, despite escalating hostilities between Israel and Iran following the killing of a senior security official in Tehran. Meanwhile, anxious investors are awaiting the latest guidance from the Federal Reserve on monetary policy and the economic outlook to assess the impact of the Middle East conflict.
As of the latest update, Dow Jones futures rose 0.10%, S&P 500 futures gained 0.14%, and Nasdaq futures advanced 0.14%.
The Europe Stoxx 600 index reached its highest level in over a week. The index rose for a third consecutive session, marking its longest winning streak in a month. The energy sector fell 0.3%, poised to end an eight-day rally as crude oil prices retreated; financial stocks provided the biggest boost to the benchmark index.
Asian stocks climbed 2%, led by South Korea's Kospi index, with Samsung Electronics surging over 7%.
AI Demand Boosts Chip Stocks S&P 500 futures rose 0.1%, after the benchmark index recorded its first back-to-back gains since the outbreak of the Iran war. The tech-heavy Nasdaq index was up 0.1% in pre-market trading.
Market sentiment was also buoyed by signs of robust demand for AI infrastructure. Micron Technology, SanDisk, and Seagate Technology all rose more than 2% pre-market. NVIDIA led gains among tech giants, rising 1%.
According to reports, NVIDIA has received approval from Beijing to sell its second-most powerful AI chip in China, while also preparing a version of the Groq AI chip for the Chinese market.
A fresh wave of optimism surrounding artificial intelligence lifted tech stocks, driven by memory chip maker Micron Technology, which is set to report earnings after the close. Micron's stock has surged over 60% year-to-date, making it the sixth-best performer in the S&P 500 this year, following a 239% surge in 2025.
Wall Street's "fear gauge" – the CBOE Volatility Index (VIX) – retreated to a two-week low. The index had earlier this month hit its highest level since April 2025. Meanwhile, the benchmark S&P 500 index recorded its first consecutive two-day gain in three weeks on Tuesday.
Bloomberg strategists noted: "There has been considerable debate about whether risk assets have fallen enough. The fact that this question is still being asked repeatedly suggests market sentiment has not yet reached peak pessimism, and the worst may not be over."
Oil Prices Retreat Brent crude was largely flat, hovering near $103 per barrel, with its trading range narrowing to the tightest level this month. An agreement between Iraq and Turkey provided some relief to the market, despite Iran's continued attacks on key energy infrastructure in the region. ING analysts stated: "Upstream production continues to decline as producers grapple with storage constraints. With no signs of de-escalation in the Middle East, Brent crude appears to have found support above $100 per barrel."
European natural gas prices dipped slightly in early trading but remain up more than 60% for the month. The Dutch TTF benchmark contract fell 1.5% to €50.80 per megawatt-hour. ANZ analysts commented: "These supply disruptions are occurring during Europe's official injection season, leaving regional gas inventories low and requiring increased LNG supplies this summer. If Middle Eastern exports decline, Europe will have to compete with Asia for scarce supplies, potentially altering LNG flow patterns."
Iran's Intelligence Minister Killed On the geopolitical front, Israeli Defense Minister Katz stated on March 18 that Iran's Intelligence Minister, Ismail Khatib, had been killed in an Israeli military strike. Katz also claimed that he and Israeli Prime Minister Netanyahu had authorized the military to "assassinate any other targeted senior Iranian officials without further approval." Iranian officials have yet to respond to the reports. Earlier, Israeli media reported that the strike targeting Khatib occurred on the evening of March 17.
Additionally, The Jerusalem Post learned from three independent sources on Tuesday that Ali Larijani, Secretary of Iran's Supreme National Security Council, was killed in the most significant targeted elimination since the war began on February 28. Israeli Defense Minister Katz subsequently confirmed Larijani's death.
Carl Dooley, Head of EMEA Trading at TD Cowen, said: "Over the past few weeks, markets have been trying to protect portfolios against the shock of record oil price increases. As the pace of this upward curve slows, or even reverses, and commodity implied volatility begins to decline, equities are finding support."
Markets remain highly alert to risks that the Middle East conflict and the near-closure of the Strait of Hormuz could push inflation higher. How policymakers will respond has become investors' primary concern. All focus will be on the Federal Reserve, which is expected to keep benchmark interest rates unchanged when its two-day meeting concludes at 2:00 PM ET.
Fed Decision Looms More attention, however, will be on how Fed Chair Powell characterizes how tariffs, higher energy costs from the current Middle East crisis, and a weakening labor market might influence monetary policy decisions later this year.
Powell is likely to emphasize that officials need more time to observe how long the conflict with Iran will last and assess its transmission to economic growth and inflation. He may also highlight the highly uncertain environment and the need for the Fed to preserve policy flexibility.
Stephanie Niven, Portfolio Manager at Ninety One, said: "The market wants to know which way the Fed is leaning next. Any change in the dot plot median, even a slight adjustment, will be closely watched."
According to data compiled by LSEG, traders now expect the Fed's first rate cut this year to be delayed from July to December.
Benjamin Schroeder, Senior Rates Strategist at ING, noted: "Our economists suspect the FOMC will modestly lower growth forecasts, raise inflation expectations, and push out rate cuts originally expected in 2026 to 2027. However, given the current situation, the Fed likely lacks sufficient confidence in its own projections, and Powell will certainly emphasize the challenges of decision-making in this volatile environment."
The U.S. Producer Price Index (PPI) for February, due at 8:30 AM ET, will provide policymakers with a final look at underlying price pressures before announcing the rate decision.
Dollar Flat Global bonds extended gains as traders scaled back expectations for further central bank tightening. The yield curve is flattening as long-term U.S. Treasury yields fall faster than short-term yields. The two-year Treasury yield fell 1.6 basis points to 3.654%, the 10-year yield dropped 2.5 basis points to 4.176%, and the 30-year yield declined 2.7 basis points to 4.825%.
Germany's 10-year government bond yield fell 1.8 basis points to 2.895%.
The U.S. dollar was largely flat. The Dollar Index, which measures the greenback against a basket of currencies, held steady at 99.533. The euro dipped 0.1% against the dollar to $1.1524. Sofie Liv Petry, an analyst at Danske Bank, said in a report that the Fed meeting is unlikely to be a "game-changer" for the euro/dollar pair.
In early European trading, New York gold futures were flat at $5,010.10. Gold typically benefits from rate cut expectations, but this possibility has diminished as the Middle East conflict poses inflationary risks. Nonetheless, gold is still up about 15% year-to-date.
Morgan Stanley: Geopolitical Shock is the "Final Blow," Sell-off Nearing End Mike Wilson, Chief U.S. Equity Strategist at Morgan Stanley, stated that the recent market turbulence is not the start of a sell-off but is nearing its end.
He noted that "this correction is mature in both time and price," supporting this view with a striking data point – 50% of the stocks in the Russell 3000 are down at least 20% from their 52-week highs; for S&P 500 constituents, this figure exceeds 40%.
He believes this week's sell-off is a "correction within a bull market," not the beginning of a new downturn. It started last fall with tightening liquidity, well before the recent spike in oil prices and VIX due to escalating Iran tensions. The geopolitical shock acted as the "final blow" – a capitulation event that typically marks an end, not a beginning.
Goldman Bets on Continued Long-Term Bull Run for U.S. Stocks David Kostin, Chief U.S. Equity Strategist at Goldman Sachs, stated that despite elevated financial market uncertainty, the S&P 500 and broader U.S. equity indices remain in a "very healthy long-term bull trend" over the next 6 to 12 months. Kostin repeatedly emphasized that despite investors grappling with renewed global geopolitical tensions, the fundamental earnings growth trend for global equity markets, including U.S. stocks, remains intact, and recommended shifting strategic allocation from cyclicals to AI super-caps.
Goldman strategists appear to be pivoting their investment focus from "chasing cyclical resilience" to "returning to high-quality leaders, particularly core tech stocks benefiting from AI capital expenditure and commercialization prospects," but this is not a wholesale abandonment of cyclicals, rather a phased style rebalancing.
Goldman believes that at this stage, instead of betting on high-volatility cyclical diffusion, it's preferable to prioritize high-quality leaders that can navigate volatility while still enjoying earnings upgrades.
Barclays: U.S. Stocks Showing Best Buying Opportunity in Nearly a Year Emmanuel Cau, Head of European Equity Strategy at Barclays, noted that U.S. equities are flashing the strongest buy signal in nearly a year. He joined a growing camp of Wall Street optimists who believe the worst of the recent sell-off may be over.
The bank's BEAT indicator fell to -8.3 overnight, its lowest level since the Trump tariff turmoil in April of last year. This level has historically marked an "extremely attractive" entry point for stocks.
Cau stated: "Barclays' equity tactical strategy team believes U.S. equity risk remains attractive during this S&P 500 pullback." He added that relatively restrained positioning by systematic and active traders could amplify any potential upward momentum.
Stocks to Watch Memory-related stocks extended gains in pre-market trading: SanDisk rose 3.6%, Micron Technology gained 2.8%, while Seagate Technology and Western Digital advanced 2.5%.
Macy's climbed over 7% pre-market after reporting better-than-expected Q4 results.
Drone concept stock Palladyne AI surged nearly 11% pre-market after securing a U.S. Navy contract to develop a low-cost, long-range missile.
Novo Nordisk fell over 2% pre-market as Structure's obesity drug study results appear competitive with Novo Nordisk and Eli Lilly.
Uber continued its rise, gaining over 1% pre-market following a collaboration with NVIDIA to launch a Level 4 autonomous vehicle fleet by 2027.
NXP Semiconductors advanced 2.2% pre-market after partnering with NVIDIA to introduce innovative robotics solutions for advanced physical AI.
French vaccine company Valneva dropped over 4% pre-market after reporting weaker-than-expected earnings.
GDS Holdings rose over 5% pre-market after receiving positive outlooks from several major banks post-earnings.
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