Dow Futures Fall on Middle East War Fears...US Stock Market Faces Heightened Risk of Further Plunge

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As the US and Iran exchanged military attacks again, the New York stock market began to waver even before opening. Dow Jones Industrial Average futures fell by 196 points, and coupled with the sell-off in AI semiconductor stocks the previous day, a warning light for a two-day consecutive decline was lit for the US stock market.

According to US investment media Barron's on July 8 (local time), Dow Jones Industrial Average futures fell by 196 points, or 0.4%. S&P 500 index futures fell by 0.2%, and Nasdaq 100 index futures dropped by 0.3%. The renewed military clashes between the US and Iran put pressure on the market, with concerns that the unstable peace between Washington and Tehran could collapse.

The US struck Iranian coastal areas in response to Iran's attack targeting ships near the Strait of Hormuz. International oil prices also surged, bringing energy supply instability back to the forefront of the market. The previous day, all three major US indices closed lower amid a sell-off in semiconductor and AI-related stocks.

The bond market also wavered. The US 10-year Treasury yield rose to 4.565% in Asian trading, reaching its highest level in four weeks. Barron's reported that rising international oil prices pushed up Treasury yields as the US-Iran ceasefire was again put to the test.

Market attention was also focused on the minutes of the US Federal Reserve's (Fed) June meeting, which were to be released on the same day. With Fed Chairman Kevin Warsh emphasizing his commitment to price stability and hinting at potential interest rate hikes in his first meeting since taking office, the market began to price in the possibility of further tightening.

Steve Englander, Global Head of G10 FX Research at Standard Chartered, stated, “If they avoid discussing rate hikes, the market might perceive that the Fed is not actually willing to raise rates.” While the dollar remained flat ahead of the release of the Fed minutes, the US-Iran conflict, rising Treasury yields, and the Fed's interest rate decision emerged as key variables for the US stock market.

[Article Key Summary]

-As military clashes between the US and Iran intensified again, Dow futures fell by 196 points, S&P 500 index futures by 0.2%, and Nasdaq 100 index futures by 0.3%.

-The US 10-year Treasury yield rose to 4.565%, marking its highest level in four weeks.

-The market is closely watching for signs of further interest rate hikes in the Fed's June meeting minutes, in addition to the US-Iran conflict and rising international oil prices.

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