US Stock Index Futures Plummet Amid Iran Tensions and Hawkish Fed Outlook
US stock index futures have taken a hit on Monday after the resumption of military attacks between the US and Iran. The escalating tensions have driven up oil prices, exacerbating inflation concerns at a time when interest rates are expected to rise.
The Federal Reserve's upcoming meeting is now seen as increasingly hawkish, with traders assigning a 60% chance of a rate hike in September. This represents a significant increase from just last week, when the probability was around 41.4%. Fed Chair Kevin Warsh has indicated that policymakers may need to raise rates if inflation doesn't ease to the central bank's 2% target.
Warsh's comments have been interpreted as distinctly more hawkish than investors had anticipated, making it clear that policy easing is not on the horizon. Recent data has shown mixed results, with mild price pressures in one report and hotter-than-expected readings in another. The ambiguity surrounding inflation trends may raise the stakes for upcoming economic releases.
The US employment report is due on September 4, but market participants are looking ahead to the non-farm payrolls data on Friday as the highlight of the trading week amid heightened monetary policy uncertainty.