U.S. stocks opened lower on Thursday evening, Beijing time, as major indices extended their decline amid renewed inflation concerns. Following the Federal Reserve's decision to hold interest rates steady, market attention remained focused on uncertainties surrounding oil price shocks. U.S. initial jobless claims unexpectedly fell last week.
Early Thursday, the international benchmark Brent crude futures surged by 5% to $113 per barrel. West Texas Intermediate crude futures rose by 1% to $97 per barrel.
The spike in international oil prices came after Iran attacked a key liquefied natural gas export facility in Qatar, and Israel struck Iran's South Pars gas field. Iran subsequently retaliated by targeting energy facilities in Qatar.
U.S. President Donald Trump warned that if more Qatari facilities were attacked, the U.S. would "massively blow up the entire South Pars gas field."
Adam Crisafulli of Vital Knowledge noted, "The core dilemma of the entire situation remains: the U.S. and Israel have 'won' the war in a conventional sense, but without deploying ground forces, there appears to be no military solution to reopen the Strait of Hormuz. This means that, barring some diplomatic resolution—which currently seems unlikely—the waterway is unlikely to return to normal."
Meanwhile, Micron Technology shares came under pressure in pre-market trading, falling 6%. Citigroup analysts attributed this movement specifically to "some profit-taking," as a memory supply shortage helped the semiconductor company's revenue nearly triple in the most recent quarter.
Wall Street had just endured a dismal trading session. On Wednesday, the 30-stock Dow Jones Industrial Average fell approximately 768 points, or 1.6%, hitting a new closing low for the year. The benchmark index also touched a 2026 intraday low and closed below its 200-day moving average—a technical level indicating that the index's long-term trend is currently negative.
The S&P 500 dropped 1.4%, and the Nasdaq Composite declined 1.5%.
The sell-off occurred after unexpected rises in the U.S. Producer Price Index and the Federal Reserve's elevated inflation expectations heightened market concerns that the war with Iran could signal a move toward stagflation for the U.S. economy—a period of low growth coupled with high inflation.
The Federal Reserve kept its policy rate unchanged at 3.5%–3.75% yesterday and still anticipates one rate cut in 2026. Fed Chair Jerome Powell stated that the energy price surge triggered by the Iran situation is likely temporary but remains highly uncertain for both growth and inflation.
Although the Fed signaled that one rate cut remains possible this year, according to the CME FedWatch Tool, markets now assign a 52% probability that the Fed will hold rates steady through 2026.
Post-Fed meeting, Morgan Stanley delayed its forecast for the next rate cut from June to September, after Chair Powell indicated he needs to see clear progress on inflation.
"A cautious Fed means a delay," wrote a Morgan Stanley team, including Chief U.S. Economist Michael Gapen and strategist Matthew Hornbach, in a report to clients late Wednesday.
Morgan Stanley analysts now expect the subsequent rate cut to arrive in December, rather than September. The firm advised investors to maintain a neutral stance on U.S. Treasury duration and the yield curve, citing potential surprises in economic data that would offer "an opportunity to capitalize on recent price movements, which imply that inflation alone will dictate Fed action this year."
Given that strong corporate earnings and consumer resilience continue to support equities, investors still hold hope that markets can self-correct. For now, the key constraint remains how long the Iran conflict lasts.
"The biggest uncertainty or unknown is how long this crisis will last," said Venu Krishna, Barclays' head of U.S. equity strategy, on Wednesday. "If it lasts longer, then the related impacts on inflation and potential growth will become the factors that tip the market balance. But we are not there yet; that is not our base case. One can only hope."
On the economic data front Thursday, initial jobless claims unexpectedly declined last week. The U.S. Labor Department reported that initial claims for unemployment benefits fell further.
For the week ending March 14, total initial jobless claims stood at just 205,000, down 8,000 from the prior week's unrevised figure and below the Dow Jones consensus estimate of 215,000. This brought the four-week moving average down to 210,750, as the labor market stagnation of low hiring and low layoffs persisted.
Continuing claims, which lag by one week, increased by 10,000 to 1.857 million.
In other economic data, the Philadelphia Fed's March manufacturing index unexpectedly rose to 18.1, driven by a surge in current shipments. The index, which measures the difference between companies reporting expansion and contraction, had been expected to come in at 8.4.
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