Futures Rise as Core Inflation Cools; Oil Falls on Iran Risks

U.S. stock futures rose after the latest consumer price index showed smaller-than-expected gains in core prices, which exclude food and energy.

The softer core reading reduced traders' expectations for aggressive near-term interest-rate increases, lifting equity futures and pushing short-term Treasury yields lower. Futures tied to the S&P 500, Dow and Nasdaq indicated gains ahead of the cash market open. The dollar edged lower against major currencies.

Oil benchmarks West Texas Intermediate and Brent both slipped after the report but remained sensitive to developments in the Middle East. Investors monitored reports of new incidents and diplomatic activity involving Iran that could threaten shipping lanes or prompt supply disruptions.

Money-market pricing moved to reflect a lower probability of additional rate hikes in the near term. Treasury yields fell across the curve, with the largest declines in shorter-dated maturities.

Sectors sensitive to interest rates, including technology and consumer discretionary, outperformed in futures trading, while financials and energy lagged.

Analysts noted that demand concerns from cooler inflation weighed on oil prices, while credible risks of supply disruption from Iran could add a premium to crude. Traders watched shipping and insurance costs and statements by regional governments for signs of escalation or de-escalation.

A market strategist noted, “The inflation data gave markets some breathing room on policy expectations. That helped risk assets, but any escalation in the Middle East would quickly refocus attention on energy prices and safe-haven flows.”

Core consumer prices exclude food and energy because those components can fluctuate sharply month to month. Federal Reserve policymakers focus on core trends to assess whether price pressures are broad-based.

Investors will watch upcoming economic releases and any further developments in the Middle East for clues on how markets will price risk going forward.