US stock index futures fell sharply Wednesday, erasing earlier gains, as reports emerged of US and Israeli strikes on Iran's South Pars natural gas field and unexpectedly strong producer price inflation data. S&P 500 futures dropped 0.4% while Nasdaq 100 futures declined 0.4% by 8:47 a.m. New York time, with Brent crude oil hovering near $106 per barrel. The Cboe Volatility Index also dipped, though markets remain volatile. The 0.7% February PPI increase signals persistent cost pressures, complicating the Fed's rate outlook.

Jay Woods of Freedom Capital Markets noted markets are 'on edge' due to Middle East headlines, describing the trend as 'bend but don't break'. Later Wednesday, Fed officials will announce their rate decision, widely expected to hold rates steady, with investors keenly watching Chairman Powell's comments on inflation, fuel prices, and private credit risks amid the conflict.