Futures Slump, Erasing Overnight Gains After Iran’s Giant Pars Field Attacked; FOMC Looms

Futures Slump, Erasing Overnight Gains After Iran's Giant Pars Field Attacked; FOMC Looms

Stocks were set to extend gains into a third day as Iraq’s deal to reroute crude via Turkey, bypassing the Strait of Hormuz, eased some supply concerns as Iranian strikes target Kuwait, Saudi Arabia, and UAE, but it all unwound shortly after 7am ET,  following an Iranian report that US and Israeli airstrikes hit its giant South Pars natural gas field and associated infrastructure; Oil and petrochemical facilities in nearby Asaluyeh also came under attack, it added rekindling fears about the impact of the war in the Middle East on inflation. Aa a result S&P futures erased all of their overnight gains, fading what was earlier a 0.6% rise, and trading in the red. Nasdaq also faded all of its gains, and was trading flat at last check. All of this happens just hours before the Fed is expected to keep rates unchanged at 2pm ET today. Bond yields were down 1-2bp into the Fed meeting where the Fed is expected to hold rates steady with the dots potentially reflecting a hawkish outlook; the USD is flat. In commodities oil / natgas prices are lower but are off their overnight lows with Ags / Metals lower. Today’s macro data focus is on PPI and the Fed meeting.

In premarket trading,  Mag 7 stocks are mixed (Nvidia +0.7%, Tesla +0.5%, Microsoft +0.3%, Alphabet +0.2%, Apple +0.2%, Meta Platforms +0.1%, Amazon -0.1%)

Applied Optoelectronics (AAOI), Lumentum (LITE) and Coherent (COHR) rally after the companies announced updates and spoke to optical demand at the Optical Fiber Communications Conference in Los Angeles.
CF Industries (CF) falls 4.3% after Mizuho Securities cut its recommendation on the fertilizer company to underperform from neutral after the stock price rallied on expected growth in demand and prices after the Iran war and disruption to the Strait of Hormuz tightened fertilizer supply.
Constellation Brands (STZ) is up 2.8% after Citi raised the recommendation on the beverage company to buy from neutral, citing a beer topline acceleration and a valuation that’s below historical levels.
Coupang (CPNG) is up 2.6% after the company said that its collaboration with Nvidia helped it build an AI platform that will support the firm’s e-commerce logistics and delivery services.
Duolingo Inc. (DUOL) falls 1.3% after Argus Research downgraded the language learning software company to hold from buy.
Gemini Space Station Inc. (GEMI) is down 1.8% after Citi analyst Peter Christiansen cut its recommendation on the crypto exchange to sell from neutral.
Grail Inc. (GRAL) rises 4.5% after TD Cowen upgraded the life sciences company to buy from hold, saying the recent selloff creates an “attractive entry.”
SL Green (SLG) is up 2.7% after Deutsche Bank upgraded the office REIT to buy from hold.
Swarmer Inc. (SWMR) jumps 35%, set to extend gains after the artificial intelligence drone software company notched the best trading debut for a US stock in nearly a year.
T1 Energy (TE) is up 3.9% after the solar equipment maker said it secured 50 MW of grid power in Norway for a data center.
In corporate news, Lululemon forecast a second-straight year of profit declines, further pressuring the brand that’s dealing with product mishaps while searching for a new CEO.  AI remains in focus, with Asian memory stocks extending gains after Reuters reported Amazon’s CEO seeing ⁠AWS reaching $600 billion in annual sales — double his own prior estimate —  and as Samsung considers a shift toward multi-year contracts for memory chips. Wall Street will be looking for any commentary from Micron on how long prices could remain elevated, when the company reports results after the close. Alibaba is raising prices for its AI computing and storage products by as much as 34%. AI stocks in China got a lift after Nvidia Chief Executive Officer Jensen Huang said OpenClaw, an agent that uses large language models to perform tasks like hailing a ride and booking restaurants, was “definitely the next ChatGPT.”

Markets remain on high alert over the war and the risk that a near-closure of the Strait of Hormuz stokes inflation. How policymakers respond is now top of mind for investors, with the Fed expected to hold rates unchanged for a second straight meeting.

Iranian attacks on Israel and Arab states in the Persian Gulf continued overnight into Wednesday, while President Trump said the US could end the war with the Islamic Republic “in the near future.” The attacks followed Iran confirming the assassination of its security chief, Ali Larijani, in an Israeli strike. Meanwhile, sentiment deteriorated rapidly and oil prices spiked to a session high after Iran said shortly after 7am ET that US and Israeli airstrikes hit its giant South Pars natural gas field and associated infrastructure. Oil and petrochemical facilities in nearby Asaluyeh also came under attack, it added. An attack, if confirmed, would mark the first time Iran’s upstream oil and gas facilities have been targeted in this war. The field is shared with Qatar.

Israel said Wednesday that Iranian intelligence minister, Esmaeil Khatib was killed. Earlier, President Donald Trump said the US could end the war with the Islamic Republic “in the near future.”

“Equity markets are following the oil price quite closely, and at this stage what we’re seeing is perhaps that they are pricing in the most positive outcome,” said Nina Stanojevic, investment specialist at St. James’s Place. “That, I think, leaves equity markets quite vulnerable.”

Even if oil prices stabilize, they remain elevated and the longer they stay there, the greater the macro implications, which could be a source of focus for this week’s busy central bank slate. 

Today at 2pm ET, the Fed is expected to hold its benchmark interest rate steady. Investors will seek insight on how the central bank weighs pressures on both sides of their mandate — and whether responding to the threat of slower growth could add fuel to inflation that’s been above the Fed’s target for five years running. Ahead of Fed’s policy rate announcement, overnight swaps price in no hike premium and a combined 25bps of easing by the end of the year. Into the meeting, traders have been deleveraging in futures and unwinding hawkish policy hedges which have profited from the recent hawkish shift in policy pricing amid rising oil prices. Fed Chair Jerome Powell will likely emphasize that officials need more time to see how long the conflict with Iran lasts and to assess how it might ripple through to growth and inflation. He’s also likely to highlight the elevated level of uncertainty and the Fed’s need to keep its options open. Our full FOMC preview can be found here. 

“The market wants to understand where the Fed is leaning next,” said Stephanie Niven, portfolio manager at Ninety One. “Any shift in the median dot, any slight changes, will be really focused on.”

In geopolitics, Japan’s Prime Minister Sanae Takaichi warned she’s facing an “extremely difficult” meeting with Trump on Thursday, after he criticized the country for rebuffing his demand for warships to help secure the Strait of Hormuz. Speaking of Hormuz, it remains effectively shut with just three total commercial vehicle crossings in the last week.

Bank of America equity derivatives strategists warn that the current gap between realized and implied volatility is unusually wide, flagging “rising stress in still-complacent markets.” Equity resilience suggests sentiment has not reached peak bearishness and the worst is likely not over, writes Bloomberg’s Skylar Montgomery Koning. 

In Europe, the Stoxx 600 touched its highest level in more than a week before trimming the advance. It rose 0.5%, rising for a third day and keeping the global equity rally going after a broadly positive session in Asia. Banks and industrials lead gains in Europe, while the food and beverage sector is among the biggest laggards.Here are some of the biggest movers on Wednesday: 

Diploma shares rally as much as 18% to their highest intraday level on record after the building components supplier boosted its organic revenue forecast for the full year.
Bollore shares rise as much as 16%, the most since February 2021, after the French conglomerate announced an exceptional dividend payment.
Softcat shares rise as much as 9.9%, the most in a year, as first-half results prove much better than analysts expected and the IT services provider lifts its full-year guidance.
Commerzbank shares climb as much as 6.3% after UniCredit’s chief executive officer said the main purpose of Monday’s fresh takeover bid for the German lender was to “break the stalemate” and lead to a “common plan” between stakeholders.
PPC shares gain as much as 9.6% in Johannesburg, the most in nearly a year, after the cement maker reported a 22% jump in adjusted Ebitda for the 10 months through January on the company’s strategic plan gains.
Logitech shares drop as much as 5.9% after UBS downgrades the Swiss maker of computer peripherals, seeing signs of easing in the positive earnings revision cycle and weaker signals in the gaming market.
HelloFresh shares drop as much as 15% to a record low after the meal-kit company’s guidance for this year’s sales and profits came in well below analyst expectations.
Axfood shares fall as much as 5.3% after Handelsbanken joined Danske Bank in downgrading the Swedish food retailer and wholesaler, saying the case for a buy rating has played out as expected after a 20% gain since December.
Verbund shares drop as much as 5%, the most since November, after the renewable electricity firm gave 2026 guidance that Citi said implied significant downgrades.
Asian shares climbed 1.9%, led by gains in South Korea’s Kospi as Samsung Electronics Co. jumped more than 7%.  The MSCI Asia Pacific Index gained as much as 2.2%, adding to Tuesday’s 0.9% advance. Shares of chip giants TSMC, Samsung and SK Hynix were the biggest contributors to the rally. Korea’s benchmark jumped 5% as authorities announced more measures to enhance shareholder value.  

In FX, the Bloomberg Dollar Spot Index slipped 0.1%, pushing losses into a third-straight day

In rates, European bonds are holding higher and Treasuries also edge up although futures trade off best levels into the early US session leaving yields richer by 1bp to 2bps across the curve. US session includes PPI data and the Federal Reserve policy interest rate announcement at 2 p.m. New York. Treasuries gains led by intermediates, flattening 2s10s spread by 1.5bps and adding to Tuesday’s tightening move. The 2s10s curve now at around 50.5bp trades just inside the yearly lows at 49.6bp reached March 12. US 10-year yields trade around 4.18% with gilts outperforming by 2bp in the sector.  The two-yield Treasury yield slipped 1bp to 3.66%; traders are betting on 26bps of Fed cuts by year-end, down from around 60bps at the end of February. On Thursday, Treasury sell 10-year TIPS in a $19 billion reopening auction

In commodities, oil erased an earlier fall with Brent crude futures now flat on the day and back around $104 a barrel, after Iran announced that its oil and gas assets in the South Pars oil field were under attack. Precious metals dip.  Based on a study of the past six supply-side oil shocks, “on average it takes around four to five months” for crude and stock markets to come to pre-shock levels, David Chao, a global markets strategist at Invesco said in a Bloomberg TV interview. The firm is “sticking with our outlook” of preferring US cyclical small cap stocks and emerging market equities, he added.

Today's US economic data slate includes February PPI (8:30 a.m. New York time), January factory orders and durable goods orders (10 a.m. New York time), January TIC flows (4 p.m. New York time), and of course the FOMC decision at 2pm.

Market Snapshot

S&P 500 mini +0.3%,
Nasdaq 100 mini +0.5%,
Russell 2000 mini +0.6%
Stoxx Europe 600 +0.5%,
DAX +0.7%,
CAC 40 +0.9%
10-year Treasury yield -2 basis points at 4.18%
VIX -0.7 points at 21.65
Bloomberg Dollar Spot Index little changed at 1206.78,
euro little changed at $1.1533
WTI crude -1.9% at $94.37/barrel
Top Overnight News

US President Donald Trump wants to reopen the Strait of Hormuz to ease a growing global energy crisis, but won't achieve that easily without a ceasefire in the war on Iran. European and Asian partners are reluctant to send warships to help reopen the strait, questioning whether a handful of ships would make any difference against Iran's ability to threaten vessels. BBG
Battered by Iranian strikes and the disruption of the Strait of Hormuz, the United Arab Emirates and some fellow Persian Gulf states have come to view Iran’s theocracy as an existential enemy. They now want the regime they once courted to be neutered, if not dismantled, when the conflict ends—so the ordeal is never repeated. WSJ
The Middle East war has turned container shipping into a “wild west”, with carriers adding thousands of dollars in charges and dumping containers at far-flung ports, according to removal companies and customers. FT
South Korean stocks jumped after authorities moved to restrict publicly traded companies from listing certain subsidiaries, curbing a practice long blamed for diluting shareholder value. BBG
Major Japanese companies, including Toyota, offered big pay hikes in annual wage talks on Wednesday, reflecting strong pay momentum for a fourth consecutive year, although uncertainty from the Middle East conflict clouds the outlook. RTRS
The European Commission is set to delay the impact of a global banking reform as it seeks to stop EU lenders from being put at a disadvantage by US moves to cut capital requirements for big banks. According to two officials familiar with the plans, Brussels will after Easter adopt legislation to neutralize the short-term impact of the Fundamental Review of the Trading Book (FRTB) — a key component of the Basel III framework governing market risk. FT
The EU is planning to overhaul its merger rules to curb national powers to block corporate takeovers in a bid to help European companies build the scale to compete with US and Chinese rivals. The proposed reforms reflect growing frustration in Brussels that capitals intervened in a series of significant corporate deals, often to protect national champions at the expense of the single market. FT
Microsoft is weighing legal action against Amazon and OpenAI over a $50bn deal that could breach its exclusive cloud partnership with the ChatGPT maker, setting up a clash between the Big Tech rivals. FT
Bond traders are unwinding bets that drove markets to price out Fed rate cuts this year. The central bank is expected to hold rates steady for a second straight meeting and Jerome Powell’s comments on the risks to the economy from the Iran conflict will be in the spotlight. BBG
Tyler Durden
Wed, 03/18/2026 - 08:40