Dow Jones futures slip as Middle East tensions offset Fed rate cut hopes

Dow Jones futures inch lower by 0.07% to trade near 51,440 during European hours on Monday. S&P 500 futures decline by 0.09% to trade around 7,770, while Nasdaq 100 futures remain steady near 31,070.

US stock futures deliver mixed results as traders adopt a cautious stance amid surging safe-haven demand. This flight to safety was primarily driven by deteriorating geopolitical conditions in the Middle East, where tensions escalated sharply after Saudi-backed forces in Yemen launched a major offensive to reclaim territory from Houthi forces.

Middle East conflict intensified further following the Iran-aligned group's seizure of the Bab el-Mandeb strait, a critical maritime chokepoint linking the Red Sea to the Gulf of Aden that serves as a vital bypass route for regional crude exports avoiding the Strait of Hormuz.

Despite these geopolitical headwinds, broader market sentiment found underlying support as softer US jobs data eased pressure on the Federal Reserve to continue raising interest rates. Investors are now closely monitoring global risk sentiment while awaiting the release of the US ISM Services Purchasing Managers Index later in the day for clearer market direction. Corporate earnings are also taking center stage, with major releases expected from companies including Constellation Brands, Levi Strauss, PepsiCo, and Delta Air Lines.

US labour data seen resilient as Deutsche Bank still looks for further Fed hikes

Economists at Deutsche Bank acknowledge that the weaker September payrolls headline was underwhelming, but stress that “although the headline payroll number was disappointing, the wider labour-market picture remains relatively resilient, particularly alongside recent ADP and jobless-claims readings.” Against that backdrop, they note that their US team “continues to expect two further 25bp Fed hikes over the next couple of quarters,” arguing that the underlying labour-market signals remain consistent with a gradual extension of the current tightening cycle.