U.S. stock futures advanced on Thursday, following the signing of a preliminary agreement by U.S. President Trump to end the Middle East conflict, which pushed Brent crude to its lowest level since the outbreak of hostilities. The market is caught between two opposing forces: concerns over rising probabilities of a Federal Reserve rate hike this year following its meeting, and optimism stemming from the reopening of the Strait of Hormuz.

As of the latest update, Dow Jones futures are up 0.32%, S&P 500 futures have gained 0.73%, and Nasdaq futures have surged 1.43%. On Wednesday, major U.S. benchmark indices fell more than 1% after Federal Reserve officials signaled that a rate increase this year was possible to curb inflation.

The European STOXX 600 index declined 0.5%, with losses in energy shares (such as Shell and BP) offsetting gains in technology stocks (like ASML, Infineon, and industrial group Schneider Electric). Europe is more vulnerable to inflationary shocks from rising oil prices, so the drop in crude is beneficial for the economy. However, the significant weighting of energy stocks in the index still resulted in a slight overall decline.

Global equities dipped 0.1%, as weakness in European futures and spot markets offset gains from record highs set in Tokyo and Seoul.

South Korea's KOSPI index closed up 2.25% at 9,063.84 points, breaking above the 9,000 level for the first time. Japan's Nikkei 225 rose 1.6% to 71,053.49 points, also setting a new all-time high.

Oil Prices Slide

Brent crude fell 2% to around $78 per barrel. West Texas Intermediate (WTI) dropped 2.5% to $74.08 per barrel. Both benchmarks are down approximately 15% for the week, as the U.S.-Iran agreement raised expectations for a restoration of supply and the return of Iranian crude to the market.

Analysts at MUFG noted that while the industry remains cautious about the pace of recovery, some oil tankers have resumed voyages, and exporters like Iraq are preparing to increase shipments.

Nevertheless, while the prospect of additional supply has erased much of the geopolitical risk premium, global inventories remain tight, particularly in the United States, where crude stocks fell by 8.3 million barrels last week.

Trump Signs Interim Deal with Iran

President Trump stated he signed an interim agreement with Iran at the Palace of Versailles in Paris. Following the deal, initial reactions were seen in the shipping market, with some oil and gas vessels, including those from Saudi Arabia's state-owned tanker company, beginning to transit the Strait of Hormuz.

The U.S. and Iran released the text of the agreement on Wednesday. The deal extends a ceasefire announced in April by 60 days to allow for negotiations on a truce and includes the "full resumption of maritime transport without fees" in the Strait of Hormuz.

Ahead of the final trading session of the week in U.S. markets, this peace agreement is reducing the risk of energy supply disruptions. Despite multiple shocks, global stock markets, primarily driven by the artificial intelligence boom, continue to hit record highs.

Raphael Thuin, Head of Capital Market Strategy at Tikehau, remarked that the market has smoothly navigated multiple tests, including the SpaceX listing, the first meeting of Fed Chair Kevin Warsh, and the U.S.-Iran peace deal.

He stated, "With the signing of the memorandum of understanding, we may be at or past the peak of inflation. The market will refocus on corporate earnings, such as those from Micron Technology next week."

Yoshimasa Maruyama, Chief Market Economist at SMBC Nikko Securities, noted that while the interim deal could normalize crude supply and prices, uncertainty persists.

He pointed out, "The current fee-free transit period is only 60 days. The future framework remains uncertain, and ongoing concerns exist."

October Rate Hike Fully Priced In

However, bond investors still face the risk that the "higher-for-longer" interest rate narrative could persist. Wednesday's Federal Reserve decision marked the fourth consecutive meeting where rates were held steady. Officials described economic growth as "solid," highlighting strong productivity gains and capital investment, while making clear that inflation has become a greater concern than weak employment.

Bob Michele, CIO at J.P. Morgan Asset Management, said, "About half the committee expects a rate hike this year, which is a clear warning to the market. I think they are preparing to hike."

Warsh did not include his own forecast in the "dot plot," continuing his stance of downplaying forward guidance. Money markets indicate traders have now fully priced in a rate hike for October, up from about an 80% chance of a hike this year earlier in the week.

David Mericle of Goldman Sachs noted that the risk of a hike has increased, but the base case scenario remains for the FOMC to hold rates steady this year.

Bond Yields Retreat

Despite a full pricing-in of an October hike, traders pared back expectations for a hawkish Fed, leading to a pullback in U.S. Treasury yields.

The yield on the 10-year U.S. Treasury note held at 4.45%, down 1 basis point on the day. The 2-year yield fell 1 basis point to 4.168%, after recording its largest single-day drop in three months the previous session.

Bloomberg strategists commented, "Short-end U.S. Treasury yields had previously risen due to inflation and economic data, but Warsh has effectively allowed the market to continue driving this trend, which will push up G10 yields, including those in economies where growth is already weak."

In Europe, short-term government bond yields followed U.S. Treasuries higher. The Bank of England is expected to keep rates on hold today, with the latest jobs data showing some improvement in the labor market. The Swiss and Norwegian central banks also kept rates unchanged.

Kathleen Brooks, Research Director at XTB, said the market had expected Warsh to criticize forward guidance, but he moved the policy style forward even faster than anticipated. She believes that while some worry a lack of guidance increases uncertainty, a policy framework emphasizing price stability might actually improve market predictability of the policy path.

Although U.S. gasoline prices have fallen below $4 per gallon for the first time since March, energy costs are just one factor keeping inflation persistently above the Fed's target.

Dollar Strengthens, Gold Rises Then Falls

The U.S. dollar extended its gains, posting its largest single-day rise since April. The dollar index strengthened slightly to 100.46, near a two-month high. The euro fell 0.1% to $1.15, and the British pound declined 0.2%, as markets await the Bank of England's rate decision.

Gold prices fell, with New York futures down 1.2% in early trading to $4,328.20, though they remain on track for a 5% weekly gain. Earlier, the Fed's hawkish stance offset support from falling oil prices (which eased inflation concerns). Higher interest rates increase the opportunity cost of holding non-yielding assets like gold.

Analysts at Saxo Bank stated the market is torn between short-term macro pressures and long-term structural support. However, with energy prices retreating, questions remain about whether the Fed's 2026 inflation forecast is too high and may need to be revised down in the future.

Warsh's Debut: Task Force to Review $6.7 Trillion Balance Sheet

New Federal Reserve Chair Kevin Warsh made his debut on Wednesday, announcing the formation of a special task force to review the central bank's $6.7 trillion balance sheet.

This marks his first step in addressing this long-criticized policy issue. In a press conference following Wednesday's FOMC decision announcement, Warsh stated that one of the independent working groups he is forming will "assess the benefits and risks under the current abundant reserves regime and examine the composition of the balance sheet."

$8.3 Trillion in Options Set for Massive Expiration

Lubner, Head of Equity and Equity Derivatives Strategy at Citadel Securities, indicated that the U.S. stock market is entering one of the most critical technical positioning adjustment windows of the year. Over the next two weeks, market movements will be driven more by trading mechanics than fundamental factors.

The first major technical event—the June "quadruple witching"—is about to occur. Current open interest in options has reached a record high, with 28% of all listed options set to expire on that day, making it the largest options expiration event in history. Approximately $8.3 trillion in U.S. options exposure will be cleared, 18% higher than the previous record of $7.1 trillion set last December.

An expiration of this magnitude will release a significant amount of gamma exposure, triggering systematic resetting of market positions. The second major technical event—quarter-end rebalancing—follows closely.

Lubner pointed out that many pension funds place great importance on asset allocation rebalancing at quarter-end. Currently, the funding ratio of the top 100 U.S. pension funds is as high as 110%, the highest level since 2001.

Therefore, "we expect many plans to continue implementing de-risking glide paths and portfolio immunization strategies, leading to mechanical equity selling and fixed-income buying at month-end," he analyzed.

Stocks in Focus

President Trump posted on Truth Social that Intel has reached an agreement with Apple to conduct chip design and manufacturing operations in the United States. Intel shares surged nearly 9% in pre-market trading, while Apple shares rose less than 1%.

Boosted by the news from Intel, shares of other chipmakers moved higher: Marvell Technology jumped nearly 7%, while Lam Research and Applied Materials both gained about 5%.

Memory-related stocks also rose: Western Digital advanced 5.6%, while Micron Technology and SanDisk both increased by about 4%.

Pfizer fell 1% after announcing that Chief Financial Officer Dave Denton will step down on August 15, with Senior Vice President of Finance Cecile Gaignon appointed interim CFO.

Following a 5% drop on Wednesday, SpaceX shares fell another 1.2%. The company recently completed a milestone listing, with its shares gaining over 40% last week.

Global professional services firm Accenture plunged 13%. The company announced it will acquire asset intelligence firm runZero, device and software supply chain security firm Netrise, and a majority stake in cybersecurity company Dragos, with the three deals totaling approximately $4.175 billion.

Falling oil prices lifted cruise line stocks: Carnival Corporation rose 3%, while Royal Caribbean Group and Norwegian Cruise Line Holdings both gained about 2%.

Airlines advanced against the backdrop of lower oil prices, with United Airlines, Delta Air Lines, and American Airlines all up around 2%.

Gun manufacturer Smith & Wesson reported earnings and revenue that exceeded market expectations, with pistol sales to sporting goods retailers surging 23% year-over-year. The stock soared 14%. Pistol shipments accounted for 80% of the company's total shipments this quarter.