Dow Futures indicate a downward trend, as oil prices experience an uptick, following a recent escalation of strikes between the U.S. and Iran that has undermined expectations for a swift peace agreement. Meanwhile, a crucial inflation metric that the Federal Reserve closely observes is scheduled for release.

Dow Futures declined on Thursday, as an investors evaluated indications of heightened tensions in the Gulf region, which have introduced new uncertainty regarding a potential peace agreement between the U.S. and Iran. By 03:37, the contract had decreased by 53 points, representing a decline of 0.1%. Futures had dropped by 11 points, also a decrease of 0.1%, while another set of futures was down by 99 points, equating to a reduction of 0.3%. The primary indices on Wall Street concluded the day with slight gains, as analysts indicated that optimism persists regarding the potential for a resolution to the conflict in Iran in the near future. Nonetheless, a degree of optimism was moderated by the White House’s assertion that a draft of a Memorandum of Understanding released by Iranian state television was a “complete fabrication. A decline in Brent crude futures, the global oil benchmark, combined with “decent” earnings reports, particularly from Abercrombie & Fitch and Bath & Body Works, and “sanguine” economic commentary from companies at a closely-watched conference helped to “catalyse big gains in consumer discretionary stocks,” analysts said. Energy-linked names, however, faced some pressure, as investors took profits on certain recently high-performing tech names, they noted.

The U.S. military executed additional strikes in Iran on Wednesday in response to drone assaults by Iran on commercial vessels in the Strait of Hormuz, as reported, referencing two officials with knowledge of the situation. Kuwait’s military reported the interception of missile and drone attacks, marking a disruption to a weeks-long period devoid of strikes. U.S. forces engaged in military action by downing a drone and targeting a drone-control facility in proximity to the southern Iranian port city of Bandar Abbas, according to the report. An official stated that the actions were “measured, purely defensive and intended to maintain” a fragile ceasefire. Iran’s Islamic Revolutionary Guard Corps announced that it had targeted an American base and pledged to respond to any forthcoming assaults.

Meanwhile, diplomatic efforts to forge a lasting peace continued but failed to yield an immediate resolution to the three-month-old conflict, with the stalemate largely stemming from disagreements over Iran’s nuclear ambitions and the effective closure of the Strait of Hormuz. Against this backdrop, the price increased by 2.8% to $96.95 a barrel, remaining below the $100 a barrel threshold, yet still significantly above pre-war levels. The closure of the Strait of Hormuz has resulted in worldwide energy supply limitations that have led to an increase in oil prices, posing a risk of inflationary pressures in various nations and potentially hindering global economic growth. Approximately 20% of global oil and liquefied natural gas transits through the pipeline situated off the southern coast of Iran.

Further analysis regarding the potential inflation wave is set to be disclosed on Thursday, coinciding with the publication of the U.S. personal consumption expenditures price index for April. The headline PCE reading is anticipated to accelerate to 3.8% from 3.5% over the twelve months leading to April, while experiencing a deceleration to 0.5% from 0.7% on a month-on-month basis. The core reading, excluding volatile components such as food and fuel, is anticipated to rise to 3.3% year-on-year, aligning with March’s month-on-month figure of 0.3%. Crucially, the gauge serves as one of the Federal Reserve’s favoured indicators of inflation. Recent releases from the Fed indicate that officials are divided regarding the future trajectory of interest rates, particularly in light of concerns about the potential effects of the energy shock on price pressures in the United States. Expectations have increased that the Fed, along with other central banks, may need to raise rates once more to control inflation.

SpaceX has entered into an agreement to supply artificial intelligence startup Anthropic with computing resources, which will be leased for an initial period of 180 days, as stated by CEO Elon Musk on Thursday evening. There are no long-term commitments associated with this arrangement. The rocket maker had previously announced an agreement to supply Anthropic with computing power from its Colossus data center through May 2029. In response to a social media post regarding the agreement between SpaceX and Anthropic, Musk stated, “SpaceX has not committed to leasing Colossus for years, although it’s possible that may be what happens.” Musk stated that the Anthropic agreement was structured as a 180-day lease, with a provision for mutual cancellation requiring a 90-day notice thereafter. He noted that the short term was requested by SpaceX, referencing the potential necessity for internal computing capacity.