By Medha Singh and Johann M Cherian
March 12 (Reuters) – U.S. stock index futures fell on Thursday as oil prices soared to around $100 a barrel, fanning inflation worries and forcing traders to dial back expectations of U.S. interest rate cuts.
Crude prices jumped following reports that two tankers were set ablaze in Iraqi waters after apparent Iranian strikes, part of a broader wave of attacks on oil and transport facilities across the Middle East. Iran warned oil prices could surge as high as $200 a barrel.
S&P 500 airline stocks, which are sensitive to crude oil prices, are on track for their biggest monthly losses in a year.
American Airlines and Southwest were down over 1% each in premarket trading on Thursday, along with cruise stocks Norwegian and Royal Caribbean.
Energy companies Occidental and EQT Corporation were marginally higher.
Goldman Sachs has pushed back its forecast for the Federal Reserve’s next rate cut to September, from an earlier expectation of June. Money market futures show traders now fully price in only one quarter-point cut by December, down from two cuts expected before the conflict.
“The problem is that investors are increasingly pricing in a more protracted conflict that causes extensive economic damage,” said a group of strategists led by Deutsche Bank’s Jim Reid.
“After all, with no concrete signs of de-escalation yet, that’s keeping oil prices elevated, and raising the risk of a broader stagflationary shock.”
Global markets have been roiled this month as the U.S. and Israel’s war with Iran disrupted oil supplies and sent crude prices sharply higher, complicating global central banks’ plans to ease monetary policy.
At 4:49 a.m. ET, Dow E-minis were down 262 points, or 0.55%, and S&P 500 E-minis were down 29.75 points, or 0.44%. Nasdaq 100 E-minis were down 109.75 points, or 0.44%.
The CBOE volatility index, Wall Street’s fear gauge, was up 1.01 points at 25.24, while futures tied to the rate-sensitive Russell small-caps index lost over 1%.
Additionally, Washington said it was launching two new trade investigations into excess industrial capacity in 16 major trading partners and into forced labor, in a long-telegraphed move, to rebuild tariff pressure after the U.S. Supreme Court tore down much of U.S. President Donald Trump’s tariff program last month.
Following a string of credit issues that have surfaced in recent months, investors are scrutinizing the roughly $2 trillion private credit market, raising concerns over loan performance and borrowers’ ability to manage elevated interest rates.
Glendon Capital Management said private credit lenders such as Blue Owl are obscuring weaknesses in their portfolios, according to a Financial Times report.
Morgan Stanley limited redemptions at one of its private credit funds on Wednesday, and JPMorgan Chase reduced the value of some loans to private credit funds.
Shares of Blackstone dropped 0.6%, while Blue Owl lost 0.8%.
Bumble jumped 24% on Thursday after the dating app operator reported fourth-quarter revenue above estimates.
Later in the day, investors will gauge jobless claims and comments from Fed Vice Chair for Supervision Michelle Bowman, ahead of Friday’s personal consumption expenditure data – the central bank’s preferred inflation gauge.
(Reporting by Medha Singh and Johann M Cherian in Bengaluru; Editing by Sherry Jacob-Phillips and Maju Samuel)
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