U.S. stock index futures slid sharply on Wednesday, with Nasdaq futures touching a four-week low after President Donald Trump said a memorandum of understanding aimed at ending the war with Iran was “over”, sending oil prices rising.
Speaking in Ankara ahead of a NATO summit in the Turkish capital, the U.S. president said he had no interest in engaging further with Iran, deepening investor concerns over renewed escalation in the Middle East and marking the latest blow to the fragile ceasefire between Washington and Tehran.
Iran’s Revolutionary Guards said they had targeted U.S. military sites in Bahrain and Kuwait after the U.S. launched a wave of strikes on Iran. Washington said those strikes were in response to attacks on tankers in the Strait of Hormuz, a critical waterway for global oil shipments.
Oil prices extended gains on Wednesday following Trump’s remarks, with Brent crude futures and U.S. West Texas Intermediate crude futures both rising more than 5 per cent.
The jump in crude prices lifted energy stocks in premarket trading. Chevron rose 2.4 per cent, Exxon Mobil gained 3 per cent and ConocoPhillips advanced 2.2 per cent.
Devon Energy climbed 2.5 per cent, while Occidental Petroleum, APA Corp and Diamondback Energy were up 2.6 per cent, 4.2 per cent and 2.4 per cent, respectively.
Investors will also focus on the minutes of the U.S. Federal Reserve’s June policy meeting, due later in the session, for clues on how policymakers are assessing inflation risks and economic growth.
According to CME’s FedWatch tool, markets are currently pricing in at least one rate hike by the end of 2026.
At 04:56 a.m. ET, Dow E-minis fell 620 points, or 1.17 per cent, S&P 500 E-minis lost 63.75 points, or 0.84 per cent, and Nasdaq 100 E-minis shed 330 points, or 1.12 per cent.
European shares dropped 1.6 per cent, on track for the biggest one-day drop in the STOXX 600 since mid-March, while U.S. futures fell 0.8 per cent to 1.2 per cent.
The VIX volatility index jumped nearly 13 per cent in its largest one-day rise in over a month, although it was still below the highs in March.
The stock market has already been under some pressure in the last couple of weeks, as investors are increasingly questioning the valuations of some of this year’s high-flying semiconductor and AI-linked stocks.
Samsung Electronics shares slid for a second straight session on Wednesday, despite the company flagging a staggering 19-fold rise in profit. Analysts and investors are concerned that memory chip demand may slow in the second half of the year.
Over the last couple of weeks, there has been a distinct shift out of red-hot chip stocks and into other parts of the market, including financials, consumer stocks and back to the so-called hyperscalers that have dominated market action over the past year or so.
Samsung’s results highlighted how investors are increasingly questioning valuations as bottlenecks in some parts of the AI supply chain — such as memory chips or data centres — start to clear, and pricing for AI models becomes harder to predict.
“What you could see is the market looking for exactly what the pricing power will be, and that can mean that there are fluctuations in valuations,” said ING chief economist and global head of research Marieke Blom.
“What we also see is capex spending is — relative to EBITDA — increasing, which means that the amount of support that can be given via share buybacks and so forth is coming down. So we may see pressure on valuations in some parts of the AI chain.”
In currency markets, the dollar rose, pushing the euro to just above $1.14, while the yen hovered around 162.4, not far from 40-year lows.
Reuters