U.S. Futures Rebound Ahead of Fed Decision Amid Israel-Iran Conflict

U.S. stock index futures rose slightly Sunday evening, aiming to recover from last week’s selloff driven by escalating tensions between Israel and Iran. The rebound comes as investors shift focus to this week’s Federal Reserve meeting, where interest rates are expected to remain unchanged.

S&P 500 Futures edged up 0.2% to 6,040.75, Nasdaq 100 Futures climbed 0.2% to 21,909.0, and Dow Jones Futures increased 0.1% to 42,553.0 by 7:55 p.m. ET.

Markets are now closely watching the Fed’s two-day policy meeting starting Tuesday. The central bank is widely expected to keep rates steady at around 4.5%. However, investors are looking for any signals pointing to future rate cuts amid cooling inflation, a slowing job market, and reduced economic growth. These factors have fueled speculation that the Fed could soften its stance later this year.

Despite cutting rates by 1% in 2024, the Fed has projected a slower pace of easing in 2025, largely due to persistent inflation concerns and uncertainty over President Trump’s ongoing trade tariffs. Trump has also been pressuring the Fed to lower rates further.

Last Friday, Wall Street tumbled as geopolitical risks surged. Israel launched strikes targeting Iran’s nuclear infrastructure, prompting swift retaliation from Tehran. The conflict significantly weakened prospects for renewed nuclear negotiations between Iran and the U.S. and triggered fears of broader war in the Middle East.

The S&P 500 dropped 1.1% to 5,976.97, the NASDAQ Composite slid 1.3% to 19,406.83, and the Dow Jones Industrial Average fell 1.8% to 42,197.79. However, defense and energy stocks saw gains, driven by rising oil prices and expected defense spending amid the escalating conflict.