Fed Interest Rate Decision Looms as Markets Digest Geopolitical Tensions

US stock futures traded in a narrow range on Wednesday as investors awaited the Federal Reserve's interest rate decision later in the day. The central bank's policy announcement, along with Chair Kevin Warsh's post-policy press conference, has markets bracing for a potentially significant move.

The biggest event on investors' radar is the Federal Reserve's policy announcement due later on Wednesday. Markets remain divided over the outcome, with traders assigning roughly a 64% probability that the Fed will leave interest rates unchanged at 3.5%-3.75%, while a sizeable minority expects a 25-basis-point increase.

Expectations of a status quo had strengthened only a few weeks ago as easing energy prices and improving geopolitical conditions suggested inflation pressures were moderating. However, the narrative changed after fresh hostilities between the US and Iran resurfaced in July, briefly pushing oil prices back above the $100-a-barrel mark.

Oil prices jumped again on Wednesday after Iran launched fresh attacks on US forces in the Middle East, ending a brief period of relative calm. Brent crude climbed nearly 4% to around $87 a barrel, while US benchmark West Texas Intermediate rose about 3% to trade near $82 a barrel.