US Stock Market Declines Amid Escalating Middle East Tensions, Brent Crude Prices Rebound

US Stock Futures Indicate Weak Start to Thursday's Trade

US stock futures pointed to a weak start to Thursday's trade on May 28, as renewed tensions in West Asia triggered a rebound in crude oil prices, reinforcing concerns that inflation could remain elevated and keep interest rates higher for longer. The S&P 500 futures slipped 0.3%, while Nasdaq 100 contracts dropped 0.5% and Dow Jones Industrial Average futures declined 0.4%. In the previous session, all three benchmark indices had scaled fresh record highs.

Market Reaction to Tensions in West Asia

The tensions in West Asia escalated on Thursday after Tehran reportedly targeted a US airbase following Washington's launch of fresh strikes on Iran. The US Central Command stated that Kuwait intercepted missiles launched by Iran late Wednesday night, describing the attack on one of America's key allies in the Persian Gulf as an "egregious ceasefire violation." The US and Iran have traded strikes throughout the week, even as US President Donald Trump repeatedly expressed confidence that his administration was making progress in negotiations aimed at ending the conflict.

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Impact on Crude Oil Prices and Inflation Concerns

The latest attacks clouded hopes of a near-term resolution in West Asia, which had earlier pulled crude oil prices lower and boosted global risk appetite. Concerns over oil-driven inflation are also rising, prompting central bankers to increasingly warn that interest rates may need to stay elevated. Central banks, including the US Federal Reserve, have previously indicated that rate hikes could be warranted if inflation remains above the 2% target.

Market Expectations and Upcoming Data Release

Investors are now awaiting the personal consumption expenditures (PCE) data due later in the day, the Federal Reserve's preferred inflation gauge, for further clues on the monetary policy path under new Fed Chair Kevin Warsh. Money markets currently expect the Fed to remain on hold for the rest of the year, though some traders are still pricing in the possibility of a 25-basis point rate hike in December.

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Market Performance of Key Stocks

Among pre-market movers, Marvell Technology slipped 2.7% after reporting first-quarter results. The company's shares have more than doubled so far this year. HP fell 1.2% following its second-quarter results, with the company warning that rising memory costs could pressure margins. On the gaining side, Snowflake soared 37.6% after the data analytics firm raised its annual product revenue forecast and announced a five-year AI infrastructure deal worth $6 billion with Amazon Web Services. Peers Datadog and MongoDB gained 5.7% and 10.7%, respectively. Drone-related companies also rallied after The Wall Street Journal reported that the Trump administration was in talks to fund drone firms. Unusual Machines jumped 27.6%, while AeroVironment and Kratos Defence & Security Solutions advanced 9.8% each.