Tehran targeted a US airbase on Thursday after Washington launched fresh strikes.
The move came hours after President Donald Trump rejected a report that he was close to a compromise deal with Iran.
Oil prices jumped over 2%, while US Treasury yields edged higher with the continued closure of the Strait of Hormuz adding to inflation worries.
The personal consumption expenditures data later in the day, the Federal Reserve’s (Fed) preferred inflation measure, will be closely watched for hints on the monetary policy path forward under new chair Kevin Warsh.
“A higher-than-expected print will further boost hawkish Fed expectations and fuel the probability of a rate hike by year-end,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
“A figure in line with expectations – or ideally softer than expected – could ease rate hike bets, but won’t take the idea of tighter monetary policy off the table as long as geopolitical uncertainties loom and energy prices remain persistently high.”
Money markets currently expect the Fed to remain on hold for the rest of the year, with some chances of a 25 basis point hike in December.
At 7.03am, Dow E-minis were down 111 points, or 0.22%, and S&P 500 E-minis were down 19 points, or 0.25%. Nasdaq 100 E-minis were down 153 points, or 0.51%.
AI optimism, earnings growth fuel market rally
Renewed confidence in AI and earnings growth momentum have underscored the recent rally, with all three major indexes closing at a record high on Wednesday.
The S&P 500 was on track for a ninth consecutive weekly gain, its longest winning streak since December 2023.
Among premarket moves, Marvell Technology dipped 2.7% after first-quarter results. The company’s shares have more than doubled so far this year.
HP was down 1.2% after second-quarter results, with the company warning that rising memory costs would pressure margins.
Snowflake soared 37.6% after the data analytics firm lifted its annual product revenue forecast and announced a five-year AI infrastructure deal worth US$6 billion with Amazon Web Services.
Peers Datadog and MongoDB rose 5.7% and 10.7%, respectively.
Dollar Tree climbed 10.9% after the discount retailer lifted its full-year profit forecast.
Electronics vendor Best Buy added 4.9% after forecasting second-quarter sales above estimates.
Drone companies rose after the Wall Street Journal reported that the Trump administration was in talks to fund drone firms.
Unusual Machines jumped 27.6% while AeroVironment and Kratos Defense & Security Solutions added 9.8% each.