US Futures Climb as Iran Deal Offsets Hawkish Fed: Markets Wrap

(Bloomberg) — US equity futures jumped and oil prices retreated as President Donald Trump signed an interim deal to end the war with Iran and reopen the Strait of Hormuz, boosting risk sentiment after the Federal Reserve’s hawkish hold.

Contracts on the S&P 500 climbed 0.7% while Nasdaq futures rallied 1.1%. The moves followed a 1.2% decline in the US benchmark on Wednesday after the Fed signaled rates may need to rise further to contain inflation. Brent crude fell more than 2%, sliding below $78 a barrel. European stock futures were down 0.5% while a gauge of Asian equities rose for a fifth day, boosted by tech stocks.

“The positive surprise for equities came from Trump’s signing of the Memorandum of Understanding with Iran,” said Rajeev De Mello, global macro portfolio manager at Gama Asset Management. “While markets had already been pricing a gradual normalization of shipping through the Strait of Hormuz, there had remained a meaningful risk of a last-minute collapse in negotiations. The agreement substantially reduces that tail risk.”

Trump told reporters he signed the document at the palace of Versailles near Paris. The MOU is now in effect, a US official said. However, it was unclear if Iran had immediately begun taking steps to fully reopen the strait.

The yield on 10-year Treasuries fell four basis points to 4.45% after rising about five basis points following the Fed decision. The two-year Treasury yield, which is highly sensitive to policy expectations, retreated two basis points to 4.16% after jumping 13 basis points in the previous session. Still, yields on Australian and Japanese 10-year bonds advanced on Thursday.

Optimism that the US-Iran deal may ease geopolitical tensions and reduce the risk of further disruptions to global energy supplies has provided another tailwind for global equities. The asset class has largely shrugged off the turmoil sparked by the war and continued to notch record highs on the back of relentless enthusiasm for artificial intelligence.

Bond investors, however, face the prospect of lingering inflationary risks that may keep the higher-for-longer rates narrative intact. Even though oil prices have eased, pressure on inventories remains acute. Stockpiles at Cushing, the largest US commercial storage hub, have sunk to about 20 million barrels, a level traders consider an operational minimum.

Central banks in Indonesia and the Philippines — two economies hit hard by the energy shock — are both expected to raise their policy rates by a quarter-point each on Thursday, according to the majority of economists surveyed by Bloomberg. The Bank of England and Taiwan’s central bank are forecast to leave rates unchanged.

Most emerging Asian currencies, including the rupiah and the peso, weakened against the dollar. In Japan, the yen fell to its lowest level against the US dollar since July 2024, raising the risk of official intervention. Investors remain concerned the central bank is not tightening policy quickly enough to contain inflation and stabilize the currency, even after it raised its benchmark rate to the highest level since 1995 earlier this week.

‘Getting Ready’

The Fed decision marked the fourth consecutive meeting in which the central bank left rates unchanged. Officials described economic growth as “solid” and highlighted strong productivity gains and capital investment, while making clear that inflation has become a greater concern than labor-market weakness.

Roughly half of Fed policymakers projected rate hikes this year, prompting traders to fully price in an increase by October and see a strong chance of a move as soon as September.

Chairman Kevin Warsh, in his first press conference as head of the Fed, declined to offer guidance on the next policy move. He emphasized that inflation has remained above the Fed’s 2% target for several years and reiterated the central bank’s commitment to restoring price stability.

“Half the committee is expecting rate hikes this year, which is a real shot across the bow at the market,” said Bob Michele, chief investment officer and global head of fixed income at JPMorgan Asset Management. “I think they’re getting ready for rate hikes.”

Warsh also announced the creation of a task force to review the Fed’s $6.7 trillion balance sheet, an issue he has long criticized. The group would examine whether “monetary policy is coming from our interest rate tool or our balance sheet tool,” he said.

Elsewhere in markets, the Bloomberg Dollar Spot Index slipped 0.1% on Thursday after climbing 0.7% in the last session. Gold and silver advanced more than 1%.

Asian tech shares followed Nasdaq futures higher, with an index of the sector climbing more than 2%.

“The Fed’s hawkish tone still hurts, but the sharp drop in oil prices helps counter the renewed inflation scare and gives investors room to push back against the higher-rate narrative,” said Hebe Chen, a senior market analyst at Vantage Global Prime.

Corporate Highlights:

National Stock Exchange of India Ltd., the operator of the world’s busiest derivatives market, has filed draft documents for what’s on track to be one of the largest initial public offerings in India’s history. Blue Origin is already rebuilding the Florida launch site where its New Glenn rocket exploded last month, making way for the space company to fly again this year and rejuvenate its ambitions to challenge SpaceX. CME Group Inc. Chief Executive Officer Terry Duffy is handing over the reins after more than 25 years at the world’s largest derivatives exchange. He will step down on March 1 and transition to executive chairman. Chief Financial Officer Lynne Fitzpatrick will take over as CEO. Angry shareholders confronted Nidec Corp.’s board at the motor manufacturer’s annual meeting, following a tumultuous year marred by accounting scandals, manufacturing defects and the ouster of its charismatic founder. One of Google’s most prominent researchers is leaving for rival OpenAI, dealing a setback to Alphabet Inc. in a multibillion-dollar race to build the world’s most powerful artificial intelligence models. Chinese investors have fueled a surge in shares of newfound AI darling Kingboard Laminates Holdings Ltd., more than doubling their stake in the company to 13% this year, according to the latest stock exchange data. Stocks

S&P 500 futures rose 0.7% as of 6:53 a.m. London time Nasdaq 100 futures rose 1.1% Futures on the Dow Jones Industrial Average rose 0.5% The MSCI Asia Pacific Index rose 0.7% The MSCI Emerging Markets Index rose 0.5% Japan’s Topix rose 1.5% Australia’s S&P/ASX 200 fell 0.5% Hong Kong’s Hang Seng fell 2% The Shanghai Composite fell 0.3% Euro Stoxx 50 futures fell 0.5% Currencies

The Bloomberg Dollar Spot Index fell 0.1% The euro rose 0.1% to $1.1516 The Japanese yen was little changed at 160.63 per dollar The offshore yuan rose 0.2% to 6.7646 per dollar The British pound was little changed at $1.3305 Cryptocurrencies

Bitcoin fell 0.8% to $63,824.33 Ether fell 1.1% to $1,725.76 Bonds

The yield on 10-year Treasuries declined four basis points to 4.45% Germany’s 10-year yield was little changed at 2.93% Britain’s 10-year yield declined four basis points to 4.75% Japan’s 10-year yield advanced two basis points to 2.615% Australia’s 10-year yield advanced two basis points to 4.78% Commodities

Spot gold rose 1.1% to $4,305.73 an ounce West Texas Intermediate crude fell 2.5% to $74.87 a barrel This story was produced with the assistance of Bloomberg Automation.

–With assistance from Aya Wagatsuma and Abhishek Vishnoi.

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