Wall Street Slips as Mideast Tensions and Fed Uncertainty Weigh on Markets

Wall Street futures declined on Tuesday amid growing investor caution as the Israel-Iran conflict entered its fifth day. The ongoing air strikes, initiated by Israel targeting Iran’s nuclear facilities, have raised concerns over potential disruptions in oil exports from the Middle East, a key global energy supplier. This geopolitical instability has added uncertainty to the markets just ahead of the U.S. Federal Reserve’s monetary policy decision.

As oil prices surged due to the regional conflict, U.S. energy stocks saw gains in premarket trading. Major players like Chevron and ExxonMobil rose by 0.7%, while Occidental Petroleum and Devon Energy climbed 1% and 1.4%, respectively. Elevated oil prices are expected to influence broader market sentiment, especially as investors anticipate the Fed’s stance on interest rates, with markets broadly expecting no immediate change.

Market indicators showed the Dow, S&P 500, and Nasdaq futures falling by approximately 0.5% each. Traders are currently pricing in nearly 49 basis points in rate cuts by the end of 2025, with a more than 50% chance of a 25-basis-point cut as early as September, according to CME’s FedWatch tool. Retail sales and import price data due later in the morning were also in focus as potential market movers.

Meanwhile, proposed revisions to President Trump’s tax-cut legislation by Senate Republicans introduced fresh volatility. The proposed bill phases out clean energy tax credits by 2028, causing solar-related stocks to plummet—Sunrun and SolarEdge Technologies dropped more than 20%, while Enphase Energy saw a 16.8% decline. In contrast, nuclear energy stocks gained as credits for that sector were extended to 2036.

In corporate news, Eli Lilly agreed to acquire Verve Therapeutics in a deal worth up to $1.3 billion, causing Verve’s shares to soar 77.1%. However, Lilly’s stock dipped slightly by 0.9%. T-Mobile also dropped 4.8% after Japan’s SoftBank offloaded 21.5 million shares in the telecom company, raising $4.8 billion. Investors, meanwhile, showed preference for safer assets, pushing U.S. Treasury yields lower as global tensions kept risk appetite in check.

Source: Reuters