Pre-Market Update: Oil Prices and Fed Rate Hike Fears Push Stock Futures Down Wednesday

TLDR

• Dow, S&P 500, and Nasdaq futures all fell Wednesday morning ahead of Alphabet and Tesla earnings
• Oil prices jumped sharply after the US carried out an 11th straight night of airstrikes against Iran
• Brent crude topped $90 a barrel for the first time in over a month, stoking inflation fears
• Traders now price in an 85% chance of at least one Fed rate hike before end of 2026
• Trump is considering replacing expiring 10% global tariffs with higher permanent duties, including a 100% tariff on imported generic drugs

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US stock futures fell Wednesday morning as investors braced for earnings from two of the biggest names on Wall Street, while rising oil prices brought inflation back into focus.

Futures on the Dow Jones Industrial Average slipped 0.1%. S&P 500 futures dropped around 0.4%. Nasdaq 100 futures fell as much as 0.9%, pointing to a weaker open for tech stocks.

The pullback comes after all three major indexes snapped three-day losing streaks on Tuesday, helped by a rebound in chip stocks.

Alphabet and Tesla are set to report second quarter earnings after the close on Wednesday. They are the first two of the so-called “Magnificent Seven” megacaps to release results this season.

Investors will be watching Alphabet closely to see whether its AI spending is paying off. For Tesla, the focus is on capital expenditure as the company pushes deeper into automation.

Oil Prices Jump on Iran Strikes

Oil prices climbed sharply in early trading after the US conducted airstrikes against Iran for the 11th consecutive night. Brent crude rose 3.2% to $93.95 a barrel. West Texas Intermediate gained 3.6% to reach $87.36 a barrel.

Brent moving above $90 a barrel for the first time in more than a month caught the attention of markets. Deutsche Bank analyst Jim Reid said the move revived fears about a potential stagflationary shock.

Reid noted that rising oil prices pushed investors to price in more Fed rate hikes, with some even speculating about a hike as soon as next week.

Fed Rate Hike Odds Rise

The chance of at least one Fed rate hike before the end of 2026 jumped to 85%, up from 70% just a week ago, according to CME FedWatch data.

Higher oil prices feed directly into inflation expectations. That puts the Federal Reserve in a difficult spot, as any move to raise rates could weigh on stocks.

Defense Secretary Pete Hegseth told Congress on Tuesday that the US has spent $37.5 billion on the conflict with Iran so far.

Tariffs and Other Earnings

On trade, President Trump is reportedly ready to replace expiring 10% global tariffs with more permanent duties. A possible 100% tariff on imported generic drugs is also under consideration. A new 25% tariff on Brazilian goods took effect Wednesday.

Elsewhere in earnings, Supermicro shares rose in premarket trading after the AI server maker reported a record backlog. IBM is also scheduled to report Q2 results Wednesday after a sharp stock drop last week following an earnings warning.