U.S. equity futures showed minimal movement in early trading on Thursday, March 5, 2026, as the military engagement between the U.S., Israel, and Iran entered its sixth consecutive day. The persistent geopolitical uncertainty has shifted investor attention squarely toward energy markets and the potential inflationary repercussions. As of 5:36 a.m. ET, futures for the Dow Jones Industrial Average were down 0.16%, while S&P 500 futures were virtually unchanged, dipping a mere 0.01%. Nasdaq 100 futures also traded flat.
Inflation and Rate Cut Expectations Adjust
The market's primary concern is the conflict's impact on key economic indicators monitored by the Federal Reserve. According to the CME FedWatch Tool, traders have significantly dialed back expectations for monetary policy easing. The probability of at least a 25-basis-point interest rate cut by June has fallen to roughly 30.7%, a sharp decline from the 49.6% odds priced in just a week prior. This repricing reflects growing anxiety that sustained higher oil prices could complicate the central bank's inflation fight.
Market participants are awaiting comments from Fed Vice Chair Michelle Bowman and the latest weekly jobless claims data for further direction. The recent volatility was highlighted by a broad sell-off on Tuesday, which saw equities, government bonds, and gold all lose ground, while oil and the U.S. dollar attracted bids. "What is happening is a classic response to an event that has a lot of uncertainty," noted Michael Arone, Chief Investment Strategist at State Street Investment Management.
Wednesday's Rebound and Sector Performance
Wall Street managed a recovery on Wednesday following a New York Times report suggesting Iran might be open to negotiations, coupled with assurances from President Donald Trump regarding efforts to stabilize oil markets. The Nasdaq Composite led the advance with a 1.29% gain, followed by the S&P 500's 0.78% rise and the Dow's 0.49% increase. The CBOE Volatility Index (VIX), often called the market's "fear gauge," retreated to near 21. "That combination is giving the market some optimism," said Jim Awad of Clearstead Advisors. Investment manager Richard Bernstein added that equities would likely rally if investors begin to perceive the conflict as short-lived.
The gains were not uniform globally. While U.S. and European markets closed higher, Asian equities faced significant pressure, described by Reuters as "hammered," as investors weighed whether the relative calm signaled a genuine de-escalation or merely a pause.
Tech and AI in Focus
The technology sector provided a notable boost. Chipmaker Broadcom (AVGO) announced a robust outlook, forecasting that its artificial intelligence chip revenue would surpass $100 billion by 2027. The company also unveiled a new $10 billion share repurchase program. These announcements propelled its stock higher and helped revive other growth-oriented names that had been under pressure. CEO Hock Tan expressed confidence in a clear path to the $100 billion AI sales target for 2027, an outlook D.A. Davidson analyst Gil Luria called "very encouraging."
Commodities and Currency Markets
Oil remained a central focus as supply risks persisted. Brent crude futures climbed $1.72, or 2.1%, to trade at $83.12 a barrel. U.S. West Texas Intermediate crude advanced $1.95, or 2.6%, to $76.61. The Strait of Hormuz, a critical chokepoint for global oil shipments, saw traffic nearly frozen with approximately 300 tankers waiting in the region. Analysts at JPMorgan warned of escalating supply losses if the passage remains obstructed.
The U.S. dollar edged higher, briefly pulling back from a three-month peak before resuming its ascent. The euro slipped 0.18% to $1.1610, while the British pound fell 0.1% to $1.3358. "Everyone is fumbling around in the dark," remarked Nick Rees, Head of Macro Research at Monex. Rabobank senior macro strategist Bas van Geffen summarized the sentiment simply: "dollar liquidity appears to be king."
Cryptocurrency and Regulatory Developments
Bitcoin staged a powerful rally on Wednesday, surging roughly 8% over 24 hours to touch $74,000, its highest level since early February. The move was catalyzed by former President Trump's public endorsement of the Clarity Act, proposed legislation aimed at clarifying the regulatory classification of crypto assets as either securities or commodities. Trump argued that banks should not "hold the Clarity Act hostage." Despite the bullish price action, Fundstrat analyst Sean Farrell characterized the move as "a rally to rent rather than own."
Broader Market Risks and Economic Data
Goldman Sachs highlighted "high" correction risks for global equities, citing stretched valuations and ongoing geopolitical strains, though the bank does not foresee a full-blown bear market. A correction is typically defined as a 10% drop from a recent peak, while a bear market denotes a 20% or greater decline. The bank noted that the MSCI All Country World Index currently sits about 4% below its record high.
The latest U.S. economic data, including the ISM services PMI which jumped to 56.1 in February, have not yet reflected the recent shock, as the survey period concluded before the onset of hostilities. Economists are modeling the potential impact: Goldman Sachs estimates that every sustained $10 increase in oil prices could reduce economic growth by about 0.1 percentage point, while Wells Fargo analysts project that a persistent 10% rise in oil could add roughly 0.3 percentage points to headline inflation later this year. A Reuters poll forecasts a gain of 59,000 jobs for February's non-farm payrolls report, with the unemployment rate holding steady at 4.3%.
European central bankers are also monitoring the situation closely. ECB Vice President Luis de Guindos stated a brief conflict is his baseline scenario but cautioned that a prolonged crisis could alter inflation expectations. Finnish central bank governor Olli Rehn echoed this caution, saying he was not "overly optimistic" about a swift resolution.
