U.S. Stock Futures Flat as Oil Nears $100, Boosting Fed Hike Odds

U.S. stock futures held steady in overnight trading following a broad sell-off on Wall Street, as investors contended with surging crude oil prices nearing $100 a barrel and growing expectations for another Federal Reserve interest-rate hike this month.

As of 8:55 PM ET (00:55 GMT), S&P 500 futures and Nasdaq 100 futures were largely unchanged, while Dow Jones Industrial Average futures edged down by 0.1%, according to Investing.com data. The cautious sentiment followed a lower close in Tuesday's regular session, where the Dow fell 1.2%, the S&P 500 lost 0.6%, and the Nasdaq Composite declined 0.3%.

Oil Surge and Yields Pressure Equities

A primary concern for markets is the sharp rise in energy costs. Brent crude, the international benchmark, climbed as high as $99.67 a barrel during Asian trading. The source attributed the rally to escalating geopolitical tensions, including reported attacks by Houthi militants on Saudi energy facilities and military actions involving U.S. and Iranian forces.

The spike in oil has reignited fears of persistent inflation, making it more challenging for central banks to consider easing monetary policy. This has also put upward pressure on government bond yields, with the benchmark 10-year U.S. Treasury yield briefly touching 4.8% on Tuesday, near its highest level since November 2023. Higher yields increase borrowing costs and can make bonds a more attractive alternative to stocks for investors.

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Fed Hike Expectations Solidify

With inflationary pressures re-emerging, traders have significantly increased their bets on a September rate hike from the Federal Reserve. The probability of a 25-basis-point hike at the Fed's Sept. 16-17 meeting has risen to approximately 68%, up from about 40% just a week ago, according to the CME FedWatch Tool.

Investors are now keenly focused on this Friday's Consumer Price Index (CPI) report, which will provide a critical update on inflation. The data will be a key factor for Fed policymakers as they weigh price stability against the risks to economic growth.