U.S. stock futures were slightly lower early Friday as crude prices stayed elevated amid ongoing hostilities in the Middle East. Brent crude continues to trade above the $100-per-barrel mark, with little sign of an imminent slowdown in the joint U.S.-Israeli offensive against Iran, which has now lasted more than a week. Rising energy costs have also fueled concerns about inflation, pushing gold toward a weekly decline, while fresh U.S. inflation data is expected later in the day. In corporate news, Adobe’s (NASDAQ:ADBE) shares weakened after the company revealed that its long-serving chief executive will step down.
Futures edge down
Futures tied to the major U.S. equity indices pointed lower on Friday, suggesting markets may close the week on a subdued note after days of volatility linked to the Iran conflict and tightening oil supplies.
As of 04:10 ET, Dow futures were down 241 points, or 0.5%. S&P 500 futures had slipped 35 points, also about 0.5%, while Nasdaq 100 futures were lower by 157 points, or 0.6%.
Wall Street’s main indices had already declined in the previous session as investors saw little evidence that tensions in the Middle East would ease soon. Comments from Iran’s new Supreme Leader Mojtaba Khamenei stating that the vital Strait of Hormuz would remain closed helped keep oil prices elevated, weighing on overall market sentiment.
Although the U.S. and Israel appear to hold the upper hand militarily, some analysts believe Iran may be attempting to counter the pressure by disrupting shipping through the Strait of Hormuz, a key route that carries roughly one-fifth of global oil supplies.
In response to Iran’s grip on the passage, the U.S. Treasury said countries would be allowed to buy certain sanctioned Russian crude until April 11. Treasury Secretary Scott Bessent also indicated that the U.S. Navy may escort commercial ships moving through the strait.
Brent remains above $100
Concerns that the conflict could drag on across a region responsible for a large share of global oil production have pushed Brent crude back above $100 a barrel.
Prices have been highly volatile throughout the week. At one point Brent surged close to $120 a barrel before retreating briefly below $90.
While these swings have dominated headlines, the bigger question for investors is whether the price surge will persist, according to analysts at Capital Economics.
“As it stands, investors in the options market put a one-in-five chance of Brent crude prices being $100 per barrel or higher in three months’ time,” said Kieran Tompkins, Senior Climate and Commodities Economist at Capital Economics, in a note.
By 04:33 ET on Friday, Brent futures had climbed 0.6% to $101.04 per barrel, leaving the benchmark up more than 9% over the past week. Before the outbreak of the Iran conflict, Brent had been trading near $70 per barrel.
Gold set for weekly drop
Spot gold was meanwhile heading for a second consecutive weekly decline, reflecting concerns that the Iran conflict could drive a renewed surge in inflation through higher energy costs.
A large share of the oil and gas passing through the Strait of Hormuz is used in the production of goods such as fertilizers and plastics. As a result, higher energy prices could ripple through global supply chains and intensify inflationary pressures worldwide.
These concerns may also prompt central banks, including the Federal Reserve, to reconsider plans for near-term interest rate cuts. Higher interest rates tend to attract foreign capital, supporting the U.S. dollar. The dollar index — which measures the greenback against a basket of major currencies — has strengthened as the conflict has intensified.
Although gold is traditionally viewed as a safe-haven asset during geopolitical crises, a stronger dollar can reduce its appeal by making bullion more expensive for international buyers.
PCE inflation data ahead
Investors will also be watching closely for the release of the U.S. personal consumption expenditures price index for January later on Friday.
Excluding volatile categories such as food and energy, the so-called “core” PCE index is expected to rise 3.1% year-on-year, slightly above the 3.0% recorded in December. The measure is closely followed by financial markets because it is one of the Federal Reserve’s preferred indicators when setting monetary policy.
Interestingly, the Commerce Department’s PCE readings have recently run hotter than the Labor Department’s consumer price index figures. This divergence largely reflects differences in weighting — particularly for housing and healthcare — as well as variations in scope and how consumer substitution effects are measured. Specifically, the lower weighting of cooling shelter costs in the PCE and higher exposure to rising medical costs have caused the PCE to remain more elevated than CPI.
On Wednesday, February’s CPI data showed relatively moderate inflation of 2.4% year-on-year.
However, it is important to note that the latest inflation data largely reflects a period before the outbreak of the Iran conflict, which began with U.S. and Israeli air strikes on Iran in late February. Since then, the inflation outlook has become more uncertain.
Adobe CEO to step down
Adobe shares declined in after-hours trading after the company announced that Shantanu Narayen, who has led the firm for eighteen years, will step down as chief executive while the board begins a search for a successor.
Narayen joined Adobe in 1998 and rose through the ranks before becoming CEO in December 2007. One of his most significant strategic decisions was shifting the company’s software offerings to a cloud-based subscription model.
During his tenure, Adobe’s annual revenue increased dramatically, rising from $3.58 billion to $23.77 billion.
The San Jose, California-based company — known for software products including the image editor Photoshop and video editing tool Premiere Pro — also reported quarterly results that beat expectations on both revenue and profit and issued guidance for the current quarter that largely exceeded market forecasts.