Oil and gas prices surge; Fed stands pat; Micron reports - what’s moving markets

Investing.com - Futures linked to the main U.S. stock indices tick down as a wave of attacks on energy infrastructure in the Middle East spark a fresh surge in oil prices. The Federal Reserve maintains its interest rate projections, keeping open the possibility of a cut later this year, although Fed Chair Jerome Powell tells markets to take the forecasts with a grain of salt. Other central banks are expected to follow the Fed’s lead and leave rates on hold, with uncertainty swirling around the Iran war. Shares of Micron slip premarket after the chipmaker outlined big spending plans.

1. Futures fall

U.S. stock futures pointed lower on Thursday, after an escalation in attacks on key oil sectors in the Middle East triggered a sharp jump in oil prices.

By 04:16 ET (08:16 GMT), the Dow futures contract had fallen by 38 points, or 0.15, S&P 500 futures had declined by 11 points, or 0.2%, and Nasdaq 100 futures had slipped by 67 points, or 0.3%.

The main averages on Wall Street slumped in the prior session, following a strike on the South Pars gas field, the Iranian section of the world’s biggest natural gas deposit. Tehran responded by targeting sites on gas facilities in Qatar and Saudi Arabia, as fighting between Iran and the joint forces of the U.S. and Israel threatened to spiral into a wider regional conflict.

Energy prices have spiked in the wake of the South Pars attack, heaping fuel onto concerns over a potential surge in inflationary pressures on countries around the world. Investors were keeping tabs on a range of central bank interest rate decisions this week to gain a sense of how policymakers see prices -- and, by extension, borrowing costs -- evolving in the months ahead.

Meanwhile, hotter-than-expected U.S. producer price inflation data for February exacerbated fears that inflationary pressures were already lingering in the world’s biggest economy even before the outbreak of the Iran war.

By the end of trading, the blue-chip Dow Jones Industrial Average had dropped by 1.6%, the benchmark S&P 500 had shed 1.4%, and the tech-heavy Nasdaq Composite had declined by 1.5%.

1. Oil spikes above $112

Brent crude futures, the global benchmark, continued to rocket higher, racing well above $112 a barrel.

By 04:40 ET, Brent had soared by 7.8% to $115.78 per barrel, an advance of roughly $8. U.S. West Texas Intermediate crude futures also climbed by 1.6% to $97.01 a barrel, although the gap between WTI and Brent has reached its widest point in more than decade due in large part to the release of U.S. strategic reserves.

At the same time, European gas prices soared by more than 25% after Iranian strikes hit the world’s largest site for liquefied natural gas production, Ras Laffan in Qatar. The location alone accounts for up to a fifth of global LNG supply.

"The move to strike Iranian energy assets is odd, given that the U.S. administration has been trying over the last couple of weeks to ease the upward pressure on oil prices," analysts at ING said in a statement.

However, President Donald Trump has denied U.S. or Qatari involvement in the attack on South Pars, saying Israel instead carried out the bombardment.

The fresh strikes on energy infrastructure in the Middle East are the latest headache for oil markets already grappling with the effective shuttering of the Strait of Hormuz. About 20% of the world’s oil traverses the narrow waterway south of Iran, but vessels, wary of potential Iranian attacks, have been mostly unable to make the crossing.

Few signs have emerged of a de-escalation in the three-week-old conflict. White House officials are mulling deploying thousands of U.S. troops to reinforce its operation in the Middle East, Reuters has reported.

1. Fed stands pat

Even as leaping oil prices darken the inflation outlook, the Federal Reserve’s policy announcement on Wednesday appeared to at least leave the possibility of interest rate cuts later this year on the table.

In theory, cutting rates can help spur growth and support a slackening labor market, albeit at the risk of igniting inflation.

A dozen of the 19 participants at the Fed’s latest meeting penciled in at least one reduction in rates in 2026 in their quarterly projections, matching predictions in December.

But, speaking at a press conference after the Fed chose to leave rates unchanged at a range of 3.5% to 3.75% as anticipated, Fed Chair Jerome Powell warned that investors should take the forecasts with some skepticism "even more than usual."

He suggested instead that rates are at a level that neither helps nor hinders growth, an argument which implies minimal space for future rate drawdowns, especially as the specter of energy-driven inflation lingers.

1. Global central bank decisions in focus

The Bank of Japan also kept rates steady as widely expected on Thursday, and flagged caution over the inflationary effects of rising energy prices.

The BOJ left its overnight call rate at 0.75% in a nearly unanimous decision by its nine member board. BOJ member Hajime Takata was the sole dissenter, calling for a 25 basis point hike amid upside risks to inflation.

Policymakers highlighted risks to medium-to-long-term increases in prices. The oil price spike presents a particular problem for Japan, which relies heavily on imported energy products that must pass through the Strait of Hormuz.

“Risks to the outlook include the future course of the situation in the Middle East as well as developments in crude prices,” the BOJ said in a statement.

Analysts at Capital Economics noted that the BOJ also signaled a willingness to hike rates again soon to combat stronger inflation.

Elsewhere, markets are gearing up for monetary policy announcements from the European Central Bank and Bank of England during the session, both of which could provide fresh insight into how officials at the central banks see the war in Iran impacting economies across Europe. The ECB and BoE are also seen standing pat.

Underlining the trend of central bank holds, the Swiss National Bank also opted not to move rates in either direction -- but stressed that the economic backdrop has become more uncertain during the Iran conflict.

1. Micron reports

Micron Technology’s fiscal second-quarter revenue nearly tripled year-on-year and earnings per share rose nearly eightfold, but shares fell more than 4% on Thursday in pre-market trade after the chipmaker said it would spend over $25 billion on new manufacturing facilities in fiscal 2026, about $5 billion more than prior forecasts.

The Idaho-based company posted adjusted earnings per share of $12.20 for the quarter ended Feb. 26, against $1.56 a year earlier and above analyst consensus of $8.79. Revenue rose 196% to $23.86 billion from $8.05 billion a year ago, beating estimates of $19.19 billion.

Gross margin hit 74.9%, up 18 percentage points sequentially and a company record.

"In the AI era, memory has become a strategic asset for our customers, and we are investing in our global manufacturing footprint to support their growing demand," Chief Executive Sanjay Mehrotra said.