Spiking Crude Oil Prices May Lead To Initial Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Thursday, with stocks likely to move back to the downside following the modest rebound seen in the previous session.

The downward momentum on Wall Street comes as the price of crude oil is soaring amid concerns about the conflict in the Middle East following President Donald Trump’s latest threats.

In a post on Truth Social, Trump announced he is launching “economic warfare” against Iran, calling it the “most crushing economic operation ever taken against any country.”

Trump also warned of “tremendous economic consequences” for any country that “allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran.”

Responding to Trump’s threats, Iran’s Foreign Minister Abbas Araghchi described the so-called “Economic D-Day” as a “diversion from America’s own crisis: unprecedented debt & surging interest costs.”

“Doubling down on failed policies will only bring further defeat—and enmity of Iranians,” Araghchi said in a post on X. “US economic terrorism threatens global economy and sovereignty worldwide.”

U.S. crude oil futures have spiked by more than 3 percent to their highest levels in nearly a month amid concerns the latest rhetoric suggests there is no end in sight to the U.S.-Iran war.

The sharp increase in the price of crude oil has also contributed to a substantial by treasury yields, which had tumbled on Wednesday after the Treasury Department announced upscaled buyback operations for longer-term debt.

A steep drop by shares of Walmart (WMT) may also weigh on Wall Street, with the retail giant plunging by more than 7 percent in pre-market trading.

The nosedive by Walmart comes after the company reported weaker than expected comparable sales growth in the second quarter and provided disappointing guidance.

Following the pullback seen over the three previous sessions, stocks showed a modest move back to the upside during trading on Wednesday. The major averages gave back some ground after an early advance but still ended the day in positive territory.

The Dow climbed 119.65 points or 0.2 percent to 53,463.05, the Nasdaq rose 41.38 points or 0.2 percent to 26,331.09 and the S&P 500 edged up 16.22 points or 0.2 percent to 7,707.98.

The strength on Wall Street came amid a significant pullback by bond yields, with the thirty-year bond yield pulling back further off its highest levels in nearly two decades.

Yields moved sharply lower after the Treasury Department announced upscaled buyback operations for longer-term debt.

The Treasury said it is increasing the size of liquidity support buyback operations for longer-dated nominal coupon securities by at least double, effective September 9th.

“This increase in buyback operation sizes reflects Treasury’s desire to provide greater liquidity support in longer-dated nominal sectors where there is consistent strong sponsorship from market participants,” the Treasury said in a statement.

Stocks gave back some ground in afternoon trading as the minutes of the Federal Reserve’s latest monetary policy revealed many officials believe an increase in interest rates would likely be necessary unless inflation declines.

The Fed said some participants also commented that financial conditions might not currently be sufficiently restrictive to facilitate a return of inflation to the 2 percent target.

At the same time, the minutes highlighted high uncertainty about the outlook for inflation due to in part to the recent re-escalation of the conflict in the Middle East.

“[Many] participants remarked that a protracted conflict could prolong supply chain challenges and could put upward pressures on inflation,” the Fed said.

Fed officials voted 9-3 to leave interest rates unchanged at the July 28-29 meeting, with Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan preferring to raise rates by a quarter point.

The Fed said the participants who favored raising rates judged that doing so would likely help forestall the need for a steeper and potentially more costly sequence of tightening moves at a later stage.

Gold stocks moved sharply higher along with the price of the precious metal, with the NYSE Arca Gold Bugs Index soaring by 9.3 percent to a three-month closing high.

Substantial strength was also visible among biotechnology stocks, as reflected by the 4.2 percent spike by the NYSE Arca Biotechnology Index.

Pharmaceutical, healthcare and housing stocks also saw considerable strength, while computer hardware, banking and semiconductor stocks showed significant moves to the downside.

Commodity, Currency Markets

Crude oil futures are spiking $2.99 to $88.82 a barrel after jumping $0.89 to $85.83 a barrel on Wednesday. Meanwhile, after surging $124.70 to $4,545.30 an ounce in the previous session, gold futures are sliding $34.80 to $4,510.50 an ounce.

On the currency front, the U.S. dollar is trading at 158.70 yen versus the 158.16 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1684 compared to yesterday’s $1.1676.

Asia

Asian stocks rose on Thursday as an emergency buyback of longer-dated debt by the U.S. Treasury helped ease some of the pressure from surging long-term yields.

The U.S. dollar index hovered near three-month lows in Asian trading, while Brent crude prices climbed above $93 a barrel due to heightened uncertainty in the Middle East, with U.S. President Doanld Trump announcing an “economic operation” against Iran and its trading partners.

Gold fell 0.7 percent to $4,491 an ounce after surging more than 4 percent on Wednesday and hitting its highest level since June 2 at $4,527.67 earlier in the day following a surprise liquidity support announcement by the U.S. Treasury.

China’s Shanghai Composite Index rose 0.2 percent to 3,903.72 after the People’s Bank of China left its key lending rates unchanged for a 15th consecutive month and Beijing relaxed restrictions on housing provident fund savings. Hong Kong’s Hang Seng Index jumped 0.8 percent to 25,698.49.

Japanese markets rose sharply after three days of declines. The Nikkei 225 Index surged 1.4 percent to 66,216.79 despite uncertainty stemming from stalled U.S.-Iran peace talks.

The broader Topix Index closed up 1.2 percent at 4,059.73. Among the top gainers, Kioxia Holdings soared 6 percent and SoftBank Group advanced 3.1 percent.

Seoul stocks skyrocketed after chipmaker SK Hynix announced a bumper 40 trillion won ($28.3 billion) share repurchase program.

While SK Hynix shares surged 12.7 percent, the Kospi Index closed 5.9 percent higher at 6,852.58. Rival Samsung Electronics soared 9.5 percent on speculation it may announce a new shareholder return policy later this month.

Australian markets ended modestly higher and the 10-year government bond yield fell below 5 percent after data showed the country’s unemployment rate unexpectedly rose in July, dampening the outlook for further RBA rate increases.

The benchmark S&P/ASX 200 Index edged up 0.3 percent to 9,083.80, snapping a six-session losing streak, led by mining and gold stocks. The broader All Ordinaries Index settled 0.5 percent higher at 9,298.50.

The big four banks fell between 1.3 percent and 2.7 percent on renewed concerns over a slowing housing market.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index ended a choppy session marginally lower at 13,919.82, snapping a two-day winning streak.

Europe

European stocks have moved mostly lower on Thursday as lingering Middle East tensions overshadowed a decline in U.S. bond yields following the Treasury Department’s move to dramatically ramp up government debt purchases.

Brent crude prices climbed more than 2 percent toward $94 a barrel, rising for a fourth consecutive session after U.S. President Donald Trump sharpened his rhetoric against Tehran, warning of economic consequences against any country that provides “any type of lifeline to Iran.”

Iran’s Foreign Minister Abbas Araghchi said Trump’s “doubling down on failed policies will only bring further defeat” to the U.S.

In economic news, German producer price inflation logged an annual increase of 3.0 percent in July, the highest in more than three years and faster than the 1.8 percent rise in June, according to data from Destatis. Economists had forecast prices to rise 2.7 percent in July.

While the German DAX Index is down by 0.6 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both down by 0.5 percent.

In corporate news, JD Sports Fashion has plummeted. The retailer lowered its profit guidance for fiscal year 2027 after reporting a steeper decline in second quarter underlying sales.

Dutch insurer Aegon has also tumbled following an announcement that CFO Duncan Russel will leave the company in April 2027.

British recruiter Hays has also moved sharply lower after reporting a full-year pre-tax loss due to restructuring charges and cutting its annual dividend.

Meanwhile, Holmen shares have risen after the Swedish forest products company reported better-than-expected second-quarter results.

Skanska has also jumped. The builder won an order worth $1.2 billion for developing four new data centers in the southeast region of the U.S.

U.S. Economic News

The Labor Department released a report on Thursday showing first-time claims for U.S. unemployment benefits expectedly declined in the week ended August 15th.

The report said initial jobless claims fell to 206,000, a decrease of 6,000 from the previous week’s revised level of 212,000.

Economists had expected jobless claims to inch up to 211,000 from the 209,000 originally reported for the previous week.

Meanwhile, the Labor Department said the less volatile four-week moving average rose to 204,000, an increase of 4,250 from the previous week’s revised average of 199,750.

Philadelphia-area manufacturing activity continued to expand in the month of August, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday.

The Philly Fed said its diffusion index for current general activity climbed to 47.4 in August from 41.4 in July, with a positive reading indicating growth. Economists had expected the index to plunge to 25.0.

With the unexpected increase, the Philly Fed index reached its highest level since hitting 48.8 in April 2021.

Looking ahead, the Philly Fed said the diffusion index for future general activity soared to 73.6 in August from 34.4 in July, reaching its highest level since August 1983.

At 10 am ET, the Conference Board is due to release its report on leading economic indicators in the month of July. The leading economic index is expected to inch up by 0.1 percent in July after dipping by 0.1 percent in June.

The Treasury Department is scheduled to announce the details of this month’s auctions of two-year, five-year and seven-year notes at 11 am ET.