Dow Jones futures slump on Middle East conflicts, upside US inflation risks

• US equity futures face selling pressure amid fears that the US could strike Iran.
• US President Trump aims to restrict Iran from building nuclear weapons.
• The Fed held its borrowing rates steady in the range of 4.25%-4.50% on Wednesday.

Dow Jones futures trade lower during European trading hours on Thursday as fears of the United States' (US) entry in the aerial war between Israel and Iran has diminished demand for risk-perceived assets.

At the time of writing, Dow Jones futures are down 0.35% to near the round-level of 42,000, S&P 500 futures ease almost 25 points and slump to near 5,955.

Meanwhile, the US Dollar (USD) ticks up, with the US Dollar Index (DXY) ending higher to near 99.00. The Greenback remains supported as Middle East conflicts have increased demand for safe-haven assets.

A report from Bloomberg showed that the United States is considering striking Iran. The report showed that senior US officials are preparing for the possibility of a strike on Iran in the coming days.

Earlier in the day, US President Donald Trump stated that he has not made up his mind whether he will strike Iran or not, but has made it clear that he will not allow Tehran to build nuclear warheads. "I may do it. I may not do it," Trump said when asked whether he would launch airstrikes on an Iranian nuclear facility earlier in the day, NBC News reported.

Meanwhile, US equity markets will remain closed on Thursday on account of Juneteenth Day.

Apart from tensions between Israel and Iran, a clear message from the Federal Reserve (Fed) that inflationary pressures are expected to rise due to the fallout from the tariff policy imposed by US President Trump has weighed on US equity futures.

On Wednesday, the Fed kept its key borrowing rates in the current range of 4.25%-4.50% for the fourth time in a row, as expected. Fed Chair Jerome Powell stated in the press conference that the monetary policy is now "modestly restrictive, and we [US central bank] have to keep rates high to get inflation all the way down".

Assuming that new economic policies by Donald Trump have de-anchored inflation expectations, the Fed revised its projection for the interest rate target higher to 3.4% for both 2026 and 2027.