U.S. stock futures moved higher late Thursday after a turbulent trading session pushed major benchmarks to their lowest levels of the year. The rebound came as investors prepared for a crucial inflation report that could shape expectations for Federal Reserve policy in the coming months. However, the recovery remains fragile as rising oil prices linked to escalating geopolitical tensions continue to weigh on market sentiment. The sharp increase in energy costs has revived concerns about inflation and economic stability, creating a volatile environment for global equity markets.

Markets Attempt Rebound After Sharp Selloff

Futures tied to the Dow Jones Industrial Average, S&P 500, and Nasdaq 100 all posted modest gains following a steep decline during the previous trading session. The Dow dropped more than 700 points and closed below 47,000 for the first time this year, while the broader equity market finished at its lowest levels since November. The selloff reflected growing investor anxiety about geopolitical risks and inflation pressures, both of which have intensified as the conflict involving Iran continues to disrupt global energy markets.

Oil Surge Drives Inflation Concerns

Energy markets played a central role in the market volatility after crude oil prices surged sharply. West Texas Intermediate crude climbed nearly 10% to settle near $95.73 per barrel, while Brent crude moved back above $100 per barrel for the first time since 2022. The rally followed renewed threats to shipping routes in the Strait of Hormuz, a critical artery for global oil transportation. Rising energy costs can ripple through the broader economy by increasing transportation and manufacturing expenses, raising fears that inflation could accelerate again.

Federal Reserve Expectations Shift

The spike in oil prices has also forced investors to reassess expectations for interest rate policy. Earlier in the year, many traders anticipated multiple rate cuts from the Federal Reserve in 2026 as inflation gradually cooled. However, the resurgence in energy prices has raised doubts about how quickly inflation will decline. As a result, financial markets have begun scaling back expectations for aggressive rate cuts, reflecting uncertainty about whether policymakers will need to keep borrowing costs elevated to contain inflationary pressures.

Market Outlook

Investor attention is now turning to upcoming economic data that could provide clearer signals about the direction of the U.S. economy. The Personal Consumption Expenditures price index, the Federal Reserve’s preferred measure of inflation, is expected to play a key role in shaping expectations for monetary policy. Additional data on economic growth and consumer confidence will also be closely monitored. In the near term, markets are likely to remain sensitive to developments in energy prices and geopolitical tensions, both of which could continue influencing global risk sentiment.