Pre-Fed decision tensions between Iran and Israel lower US stock futures
Rising tensions between Iran and Israel spooked global markets on Tuesday, sending US stock futures plummeting. The S&P 500 futures fell 0.6 percent below 6000. Down more than 240 points, Dow Jones futures traded near 42720 in Europe. The Tehran Times reports that investors are reacting rapidly to news that Iran fired ballistic missiles toward the Mossad’s spy headquarters. The strike followed the murder of high-ranking Iranian officer and Khamenei aide Ali Shadmani. Now Tehran is more determined to retaliate.
People worry about increasing instability in the Middle East due to rising violence. Market participants watch for US participation and friendly country responses. Long-term conflict may affect energy prices, trade routes, and military equities, analysts believe. Since energy supplies were unknown, Brent oil rose early Tuesday but remained volatile.
Markets need Fed policy direction
While geopolitics dominate the news, everyone is monitoring the Fed’s next policy meeting. According to the CME FedWatch Tool, the Fed will likely maintain rates between 4.25 and 4.50 percent. Investors worry more about Chair Jerome Powell’s future predictions. Despite lowering inflation, consumer confidence remains low. If rate cuts are likely later this year, the market may move swiftly.
US Dollar Index (DXY) at 98.20 indicates investor uncertainty. The dollar normally rises during wartime, but it seems to be restricted now, maybe because the Fed is expected to halt hiking rates. Gold prices rose as investors sought traditional geopolitical risk mitigation.
Retail and consumer sales statistics may also matter
The May US Retail Sales report at 12:30 GMT today could trigger more volatility. Analysts expect the number to dip by 0.7 percent following slight advances in April, suggesting consumers are slowing down. If demand remains weak, this might worsen the economy and lower equities.
Global markets are cautious and may yet be volatile due to international upheaval and domestic policy uncertainty.
Also read: Gold Loses its Shine Below 3400. Even though the world is in chaos, What is causing the decline?