US stock index futures slipped on Thursday morning as the European Central Bank raised its key interest rate to 2.5%, while Treasury yields continued their upward trajectory. Market risk appetite remained firmly suppressed ahead of major tech earnings releases due later today. With the deteriorating situation in the Middle East, oil prices have reclaimed the $100 per barrel mark, rattling global bond markets once again.

As of the latest update, Dow futures were down 0.23%, S&P 500 futures fell 0.43%, and Nasdaq futures declined 1.06%. In Europe, the Stoxx 600 index traded 0.2% lower.

The ECB delivered its second rate increase since the Iran war erupted in February, responding to signals that inflation will remain significantly above its 2% target. The deposit rate was raised by 25 basis points to 2.5% on Thursday, a move anticipated by nearly all economists surveyed. The central bank reiterated that it would not pre-commit to future policy moves, instead making decisions on a meeting-by-meeting basis as incoming data arrives.

"The Middle East conflict continues to generate inflationary pressures, and inflation is expected to stay well above target for an extended period," the ECB noted in its statement. "The outlook remains highly uncertain, with upside risks to inflation and downside risks to economic growth."

Thursday's hike puts eurozone policymakers ahead of their global peers in addressing surging energy prices, which have driven inflation to its highest level in nearly three years. Traders anticipate further ECB tightening, with market pricing indicating two additional rate increases by mid-2027. This contrasts sharply with the Federal Reserve and the Bank of England, both of which have yet to tighten policy in response to the Middle East conflict and are widely expected to hold rates steady next week.

Brent crude broke above $105 per barrel after Iran signaled readiness for further escalation of the war. Crude had crossed the psychologically significant $100 threshold on Wednesday for the first time since July, as traders also grappled with the prospect of rising inflationary pressure.

"In the current environment, Brent breaking above $100 is likely to be viewed by many market participants as a highly significant event," said Nick Twidale, chief market strategist at ATFX Global.

Twidale noted that some traders had been holding off, waiting for a Middle East peace agreement, but as the reality of a prolonged conflict becomes clearer, these participants may now "pull the trigger."

Oracle Earnings on Deck

Oracle is set to report its quarterly results after the US market close. The company's stock has fallen 17% so far this year, significantly underperforming other tech names, as investors worry about its hefty capital expenditures and elevated leverage levels.

"While quarterly results can drive short-term volatility, we believe underlying earnings trends are what truly determine long-term stock performance," said Francisco Simon of Santander Asset Management. "The structural growth narrative remains intact, and that's ultimately what the market cares about most."

Another set of earnings figures from Adobe Inc. will also provide a fresh window for investors to assess how major software companies are navigating the challenges presented by artificial intelligence.

White House Warns Trump of Extended Conflict

White House advisers have privately told President Trump that the Iran war could potentially last through the end of his term, according to a US official. In discussions held in the Oval Office and the Situation Room, Vice President Vance, Secretary of State Rubio, and others reportedly addressed the possibility that Tehran could continue resisting US pressure through blockades and other military strategies, potentially extending the conflict beyond the next presidential inauguration in January 2029.

However, Trump himself has expressed expectations that hostilities with Iran would conclude after the US midterm elections in November this year.

Senate Subcommittee Launches OpenAI Investigation

In a separate development, a Republican-led Senate subcommittee focused on disaster management has launched an inquiry into OpenAI's handling of the July breach at Hugging Face. Senator Josh Hawley of Missouri wrote to OpenAI CEO Sam Altman: "As you know, a growing number of AI experts in the public sphere are warning about the existential risks posed by AI." He added: "Just this week, three Anthropic researchers publicly stated that the probability of AI wiping out humanity within the next decade exceeds 10%."

Hawley indicated the investigation is a response to OpenAI's recently published internal findings. The Hugging Face incident marks a turning point in AI history, prompting OpenAI to slow down its own model releases and sparking industry-wide alarms about AI-driven cyberattacks.

Bessent Takes on Bond Traders

Meanwhile, US Treasury prices fell, with the benchmark 10-year yield inching up to 4.85%, as the market awaited a $22 billion auction of 30-year bonds. The recent global bond selloff has pushed 30-year yields to their highest levels since 2007. Treasury Secretary Scott Bessent said in August that the government would expand its buyback program for long-dated bonds.

"Bessent has thrown down the gauntlet to a group of professional traders who don't like being told what to do," said Matt Simpson, senior market analyst at StoneX. "He might win a battle or two, but he can only win the war if bond traders are willing to let him."

The Treasury also announced Thursday that it would repurchase $6 billion in long-term bonds, though this scale disappointed some investors. "Spending the equivalent of 4% of GDP to win an election while the Treasury buys bonds at the long end is not a coherent policy mix," said Patton of Columbia Threadneedle.

The previous trading session was packed with events, including Donald Trump's pledge to send $5,000 "Trump dividends" to every American adult if his party wins the November congressional elections. Market reaction was muted overall. "The market seems to assign a very low probability to this measure actually becoming law, mainly due to its enormous fiscal cost and the political hurdles it faces in Congress," said Yanguas of CaixaBank. "Unless the proposal gains substantial legislative support, investors are more likely to treat it as campaign rhetoric."

The dollar was relatively stable, slipping 0.1% against a basket of major currencies. Bitcoin edged down 0.2% to $78,106.89, while New York gold futures fell 0.1% to $4,455.10 per ounce.

Stocks in Focus

Macy's reported earnings and raised its full-year guidance for net sales, comparable store sales, and earnings per share. It remains unclear whether the company's quarterly EPS of 40 cents is directly comparable; the LSEG consensus estimate stood at 37 cents. The stock declined 1.6%.

Meta, the parent company of Facebook and Instagram, rose 1.4% following a JPMorgan upgrade. The bank believes the company has "significant upside growth potential" as it rolls out AI models and related products. Apple gained 1% after unveiling its foldable iPhone and other products at an event the previous day; Wednesday's session was tepid, with the stock closing slightly lower.

Swiss pharmaceutical giant Novartis rose nearly 2% after a major shareholder called for a board shakeup to improve corporate governance. The stock had declined earlier this week following clinical trial setbacks for three drugs.

Copper mining companies fell alongside copper prices. Copper has risen this year on tariff expectations, but prices pulled back on Thursday after hitting an intraday record high. Freeport-McMoRan (FCX) plunged nearly 7%, while Southern Copper (SCCO) dropped more than 6%.

Drone manufacturer AeroVironment surged over 5% after crushing first-quarter expectations. The company reported adjusted EPS of 59 cents on revenue of $480 million, versus LSEG analyst expectations of 25 cents and $456 million.

Teen apparel retailer American Eagle tumbled more than 15% after second-quarter comparable sales fell 1%, worse than the 0.6% decline analysts had projected. The company also guided current-quarter operating income to a range of $110 million to $115 million, below the StreetAccount consensus of $124.3 million.

Navan, a travel and expense management software platform, plunged 15.4%. FactSet data shows the company posted adjusted Q2 EPS of 5 cents, only slightly above analyst expectations of 4 cents. The company also announced the acquisition of events platform BoomPop, with no financial terms disclosed.

Medical device maker Cooper Companies tumbled approximately 17% after issuing fourth-quarter guidance that missed market expectations. The company forecasts revenue of $1.057 billion to $1.080 billion and adjusted EPS of $1.05 to $1.09; LSEG consensus was $1.11 billion in revenue and $1.19 in EPS.

Energy transportation firm Enbridge announced a $2.55 billion acquisition of Tallgrass Energy's crude oil transportation business, sending its shares down nearly 3%. Energy pipeline company Kinetik gained 4.6% on reports it is evaluating strategic alternatives, including a potential sale of the company.