The sharp relief rally on Wall Street is showing signs of fatigue, with US equity futures slipping on Thursday as cracks begin to emerge in the fragile Iran ceasefire that had buoyed global markets just a day earlier.
Futures linked to the three main indices were down around 0.4% each, indicating a cautious start after Wednesday's surge.
At 6:21 AM (EST). S&P 500 futures were down 26.5 points or 0.39% at 6,797.25, whereas the Dow Jones Industrial Average futures slipped 222 points, or 0.46%, to 47,922. Futures tied to the Nasdaq 100 were down 87.5 points, or 0.35%, at 24,986.75.
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The pullback follows a euphoric session where markets rallied sharply on news of a two-week ceasefire between the US and Iran. However, the optimism is now being tempered by developments suggesting the truce may be far from stable.
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Reports indicate renewed tensions in the region, including continued hostilities linked to Israel-Lebanon dynamics and retaliatory actions by Iran-backed groups, raising doubts over how long the ceasefire can hold.
Adding to investor anxiety, the Strait of Hormuz, a critical artery for nearly a fifth of global oil supply, remains only partially functional, with restrictions, elevated shipping risks and high insurance costs persisting despite the agreement.
Oil prices, which had plunged on ceasefire optimism, rebounded nearly 3% amid concerns over supply disruptions and lack of clarity on safe passage, further clouding the inflation outlook.
Markets are also reassessing the macro impact of the conflict. Expectations for US Federal Reserve rate cuts have cooled, with traders dialing back bets amid fears that sustained geopolitical tensions could keep energy prices elevated and inflation sticky.
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The ceasefire itself remains conditional and time-bound, with key disagreements over terms, including nuclear commitments and enforcement mechanisms, yet to be resolved.
While the initial announcement triggered a global risk-on rally, analysts are now warning that the situation remains fluid, with any escalation in the Middle East capable of reversing sentiment quickly.
In essence, what began as a relief rally is now evolving into a wait-and-watch market, with geopolitics once again at the centre of investor nerves.
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