Dow Jones futures gain ahead of Fed policy decision

• Dow Jones futures advance despite investor caution surrounding renewed Middle East hostilities and the Fed decision.
• US-Iran tensions flared after the US military intercepted a surprise Iranian attack aimed at American Middle East troops.
• Fed is expected to hold rates steady, though traders see an unusually high 31.5% chance of an immediate hike.

Dow Jones futures gain 0.11% to trade around 53,000 during European trading hours on Wednesday. Meanwhile, S&P 500 futures rise 0.16% to trade near 7,480, though Nasdaq 100 futures decline 0.17%, trading near 27,870, respectively.

US index futures remain mixed as traders adopt a cautious stance amid renewed hostilities in the Middle East and the upcoming Federal Reserve (Fed) policy decision. After several days of relative calm, geopolitical tensions reignited, fueling fresh concerns over potential disruptions to global energy supplies. The escalation began when the US military reported intercepting what it described as a surprise Iranian attack targeting American troops stationed across the Middle East.

Iran-backed militias in Iraq launched drone strikes against oil facilities in Saudi Arabia’s Eastern Region for a second consecutive day, though the full extent of the damage remains unclear. It is believed to be a direct countermeasure against recent US strikes on Iranian naval assets, which triggered immediate retaliation. CENTCOM subsequently executed precision airstrikes in Iraq aimed at neutralizing Iran-backed groups planning further operations against US forces and Saudi energy infrastructure.

Meanwhile, monetary policy uncertainty continues to weigh on market sentiment ahead of the Federal Reserve's announcement. While the central bank is widely expected to leave interest rates unchanged, traders are currently pricing in an unusually high 31.5% chance of an immediate rate hike. Looking further ahead, markets are factoring in a nearly 79.0% probability of a rate increase in September, reinforcing expectations that global borrowing costs will remain elevated for longer.

During Tuesday’s US regular session, major US indices saw mixed results, with the Dow Jones and S&P 500 rising 1.03% and 0.21%, respectively, while the tech-heavy Nasdaq Composite slipped 0.22%. Ford Motor surged roughly in extended trading after exceeding financial estimates and raising its full-year 2026 outlook. Conversely, semiconductor manufacturer SK Hynix fell despite posting record quarterly profits, as the results fell short of Wall Street expectations.

Semiconductor slump deepens as Korea and Taiwan indices tumble

Analysts at Rabobank highlight that equity markets “saw divergence yesterday between semiconductor stocks and value plays,” with the tech-heavy Asian benchmarks bearing the brunt of the sell-off. They note that South Korea’s KOSPI “closed the day down 10.84% after triggering a market circuit-breaker early in the session,” underscoring the severity of the move, while Taiwan’s TAIEX index “fell by 4.65%.” This sharp underperformance of semiconductor-linked names stands in stark contrast to the relative resilience of broader value-oriented segments of the equity market.