On Thursday, stock futures experienced a downturn as investors reacted to Federal Reserve Chair Jerome Powell’s announcement to maintain benchmark interest rates. Tensions continue to increase in the Middle East. This decision comes on the heels of President Donald Trump’s recent hints at possible military intervention in Iran. The Dow Jones Industrial Average futures dropped down by 201 points, or a drop of 0.04%. At the same time, futures linked to both the Nasdaq 100 and S&P 500 were down 0.2%.
Powell’s message was that the Fed is in no hurry to lower rates, putting a firm data-dependent stamp on the overall approach. He signaled that the central bank will remain responsive to hawkish economic conditions. This analysis is critically timed, coming at a moment of considerable uncertainty as to the broader economic impact of Trump’s tariffs.
His boss, President Trump, of course savaged Powell publicly for his interest rate increases. He asserted that the Fed Chair is already costing the U.S. “hundreds of billions of dollars” by holding off on rate cuts. President Trump went on to call Powell “destructive” for maintaining a steady course on rates, deepening his long-running feud with the Federal Reserve.
The geopolitical landscape only increased the level of uncertainty investors were facing. Trump is considering direct U.S. military involvement in a strike against Tehran. At the same time, Israeli Prime Minister Benjamin Netanyahu has escalated the threats, ordering strikes on “strategic targets” in Iran. Financial analysts opine that these changes might play a major role in preventing market turmoil.
Jeff Buchbinder, an investment strategist, noted the complexity of the situation, stating, “There are several key questions to answer before we know how stocks will handle this geopolitical shock, including how much of Iran’s energy infrastructure will be impaired and for how long, whether Iran’s nuclear capabilities will be completely wiped out, and whether the current regime will remain in power.”
The S&P 500 finished with a small weekly loss of -0.07%. Yet worries over geopolitical conflicts and US domestic monetary policy are weighing heavily on investor sentiment. On Thursday, both Brent and U.S. crude oil prices jumped approximately 3%. This change is a direct result of increasing concerns over the security of supply amid the threat of war.
U.S. markets were closed for regular trading on Thursday in observance of the Juneteenth holiday. That provided a calmer backdrop for investors, who are remaining vigilant to future news.