U.S. Futures Give Up Gains Amid Rising Tensions in the Middle East, Fed Decision Pending

U.S. stock futures held steady early Wednesday, paring earlier gains after Iran’s Supreme Leader Ayatollah Ali Khamenei issued a sharp rebuke to U.S. demands, escalating tensions in the Middle East just hours before the Federal Reserve is set to announce its latest policy decision.

As of 07:10 ET (11:10 GMT), Dow Jones futures dipped 27 points (-0.1%), S&P 500 futures were flat, and Nasdaq 100 futures edged up 15 points (+0.1%). On Tuesday, major indexes closed lower for a second straight session amid continued conflict between Israel and Iran and disappointing U.S. retail sales. The S&P 500 fell 0.8%, the Nasdaq lost 0.9%, and the Dow declined 0.7%.

Khamenei Pushes Back Against U.S.

Tensions flared further after Khamenei rejected U.S. President Donald Trump’s demand for unconditional surrender, warning that no peace or war could be imposed on Iran. “Any U.S. military intervention will undoubtedly be accompanied by irreparable damage,” he said in his first public statement since Israel began striking Iranian targets last Friday.

According to Reuters, the White House is evaluating several responses, including the possibility of coordinating military action with Israel against Iranian nuclear facilities.

Fed Set to Hold, Dot Plot in Focus

Markets now turn their attention to the Fed, which concludes its two-day meeting later today. While no change to interest rates is expected—keeping them in the 4.25%–4.50% range—investors will scrutinize the central bank’s updated economic projections and dot plot for clues about future policy moves.

With uncertainty stemming from Trump’s proposed tariffs, the Fed is expected to maintain a cautious stance. Current market pricing reflects a slightly better-than-even chance of the next rate cut occurring in September, according to the CME FedWatch Tool.

Key economic data due Wednesday includes May housing starts, preliminary building permits, and weekly jobless claims—offering further insight into the health of the U.S. economy.

Banking Sector in Spotlight

Regulatory developments also drew attention as Bloomberg reported that U.S. banking regulators are planning to reduce the Enhanced Supplementary Leverage Ratio (ESLR) for the nation’s largest banks. The proposed change could lower the buffer from 5% to between 3.5% and 4.5%, easing capital constraints for major lenders such as JPMorgan Chase (JPM), Goldman Sachs (GS), and Morgan Stanley (MS).

Oil Prices Rebound

Crude prices edged higher following earlier losses, supported by fears of supply disruptions in the Middle East. As of 07:10 ET, Brent crude was up 0.2% at $76.60 a barrel, and West Texas Intermediate rose 0.2% to $72.41. Both benchmarks surged over 4% on Tuesday amid concerns over the security of the Strait of Hormuz, a vital oil transit route.