US equity futures were mostly flat early Wednesday, as markets reacted to ongoing uncertainty stemming from the Iran conflict and anticipated fresh US inflation figures. The standoff in the Strait of Hormuz and volatility in oil prices have kept investors on alert, with upcoming economic data expected to shape views on Federal Reserve policy.
At 4:28 p.m. Bangkok time, futures tracking the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 all edged down 132, 36.5, and 9.25 points or less than 0.1% respectively.
Concerns over the impact of the Iran war on global markets have led to increased turbulence in both equities and energy prices during the week. Oil market participants continue to monitor the situation in the Strait of Hormuz following a report from the United Kingdom’s Royal Navy that three vessels had come under fire Wednesday morning. The strait, an essential passage for crude shipments, remains a focal point for supply disruption fears.
Oil prices, which climbed close to $120 per barrel on Monday amid heightened tensions in the Middle East, turned volatile amid shifting expectations around supply intervention. Prices dipped Tuesday after speculation that international reserves could be tapped and following mistaken comments by Energy Secretary Chris Wright regarding a US Navy operation in the Strait of Hormuz.
On Wednesday, both West Texas Intermediate and Brent crude benchmarks recovered, rising over 5% as the International Energy Agency was reported to propose an unprecedented release of strategic oil reserves to counterbalance the market dislocation. Both contracts traded above $85 and $90 per barrel, respectively.
A research note from Goldman Sachs on Wednesday indicated that the IEA’s proposed reserve release would surpass the 182 million barrels previously deployed following Russia’s 2022 Ukraine invasion. The analysts estimated that this move could help offset up to 12 days of lost exports, reducing oil prices by around $7, provided half of the emergency oil drawn from reserves is retained in OECD commercial inventories.
Investors are also awaiting the release of February’s consumer price index, which is expected to provide further insight into overall US economic strength. This follows recent data that have pointed to a softening labor market. Economists surveyed by Dow Jones predict headline inflation increased 2.4% year-on-year for the month.
