Stock market futures dropped sharply Thursday morning following President Donald Trump’s announcement that military operations against Iran would escalate in the coming two to three weeks, contradicting his previous statement to Reuters that America would be “out of Iran pretty quickly.”
The conflicting messages about the timeline and goals of the month-long conflict have created significant market volatility throughout March, resulting in the S&P 500’s largest monthly decline in a year. Meanwhile, Brent crude oil posted record monthly gains and climbed to $107 per barrel following Trump’s latest remarks.
Market uncertainty has shifted Federal Reserve policy expectations dramatically. Before the conflict began, traders anticipated at least two quarter-point interest rate reductions this year. Now, according to LSEG data, rate futures suggest the central bank will maintain current levels throughout most of the year. At one point in March, investors even priced in a 50% probability of a rate increase due to conflict-related concerns.
By 3:05 a.m. Eastern Time, Dow futures had fallen 551 points or 1.18%, while S&P 500 futures dropped 86.75 points or 1.31%. Nasdaq 100 futures declined 379 points or 1.57%.
The Russell 2000 index futures, which are particularly sensitive to interest rate changes, fell nearly 2%. The CBOE VIX volatility index, often called Wall Street’s fear gauge, jumped 2.1 points to 26.68. Over the previous two trading sessions, expectations for a quick war resolution had encouraged risk-taking and pushed the VIX to its lowest level in over a week.
Investors sought safety in U.S. dollar assets while traditional safe-haven investments like precious metals experienced declines.
Market attention will also focus on SpaceX developments after reports that Elon Musk’s company has quietly filed for a public stock offering targeting a $1.75 trillion valuation, according to Reuters sources familiar with the matter. Related space industry stocks including Rocket Lab, Planet Labs and Intuitive Machines gained ground Wednesday as investors anticipated renewed sector interest.
Dallas Federal Reserve President Lorie Logan’s scheduled remarks later Thursday will be closely monitored for interest rate guidance, while weekly unemployment claims data precedes Friday’s March employment report. U.S. markets will remain closed Friday for the Good Friday holiday.
