Dow Jones futures dropped sharply on Thursday, with investors growing increasingly uneasy about the ongoing conflict between Israel and Iran and the possibility of direct US military involvement.
At the time of publication, Dow futures were 0.46% down, hovering around 42,000 level. The futures of other indices like S&P 500 and Nasdaq also traded in red on Thursday.
The dip came amid persistent inflation risks in the US and signals from the Federal Reserve that it will keep policy restrictive for longer, adding to the market concerns.
US President Donald Trump made some vague remarks on Wednesday around possible US strikes on Iran, which fed the anxiety of investors and pushed up the uncertainties in the market.
These developments have triggered a classic flight to safety, with investors pulling back from equities and seeking refuge in assets like the US dollar.
Fed holds rates, but inflation fears persist
The US Fed’s latest decision has only added to market jitters. In its June 2025 policy meeting, the central bank kept its benchmark interest rate unchanged at 4.25%-4.50%.
While the decision was widely expected, the Fed’s outlook around inflation didn’t go well with the investors.
Federal Reserve Chairman Jerome Powell called the current policy “modestly restrictive” and stressed the need to keep rates higher until inflation comes back down to target levels.
The market sentiment may be dampened further as the central bank raised its interest rate forecasts for 2026 and 2027, now projecting rates of 3.6% and 3.4%.
This seems to be a clear sign that borrowing costs could stay elevated longer than previously thought.
Holiday closure and thin trading
US stock markets are closed on Thursday for Juneteenth, which meant trading volumes were lighter than usual and price moves in futures were more dramatic.
The investors kept a close watch on global developments, knowing that any major news could set the tone when markets reopen. With fewer traders in the market, any big geopolitical news or economic data may have an even bigger impact, making sharp swings more likely.
Global ripples: Not just a US story
The risk-off mood wasn’t just limited to the US markets as investors across the world are holding their breath amid developing geopolitical situation.
Asian markets slipped on Thursday as benchmark indices shed gains accumulated over the week. Japan’s Nikkei slipped 1.02% down while Hong Kong’s Hang Seng index dropped 1.48%.
The traders remained cautious in India as both Sensex and Nifty 50 remained flat throughout the day and ended on a muted note.
Meanwhile, both oil prices and the US dollar moved higher, reflecting a global rush to safe-haven assets as uncertainty spread across markets.
With the situation still evolving, investors everywhere remained on high alert, watching closely for any signs of escalation that could ripple through the world economy.
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