Oil prices surged after a surprise Iranian attack on American forces in Jordan. Brent crude rose above $87 a barrel, up 3.7% to $87.17, while WTI futures climbed 3.6% to $82.12. The escalation knocked fragile investor faith in peace talks and pushed U.S. Treasury yields higher.

The dollar weakened ahead of the Fed's interest-rate decision. Markets largely expect rates held this month with a hike penciled for September, though renewed hostilities could justify immediate action. Shortly after the strikes, the U.S. and Saudi Arabia launched strikes in Iraq against Iran-backed groups. Analysts at ING warned these developments throw cold water on swift de-escalation, with Saudi oil infrastructure increasingly targeted and tanker traffic through the Strait of Hormuz essentially halted.

U.S. stock futures moved higher, but chip stocks extended losses. Sandisk and Micron Technology fell premarket as semiconductor enthusiasm waned. SK Hynix shares dropped despite record profits, and European chip makers also fell sharply. Investors will watch Microsoft and Meta earnings after the close for AI spending signals.