Stock futures were higher ahead of Friday's open after Federal Reserve Governor Christopher Waller said inflation levels were tame enough that the central bank could cut interest rates at its next meeting, a more optimistic outlook than Fed Chairman Jerome Powell said on Wednesday.
As oil prices retreated, traders also pushed stocks higher after U.S. President Donald Trump said he would hold off on a decision on whether to strike Iran.
Futures tied to the Dow Jones Industrial Average rose 107 points, or 0.3%. Nasdaq 100 futures rose 0.3% and S&P 500 futures rose 0.2%. U.S. stocks were closed on Thursday for the Juneteenth holiday.
Earlier, Waller said the central bank could cut rates as early as July. "I think we have the ability to do that, possibly as early as July," Waller said in an interview with Squawk Box.
"Whether the committee agrees or not, that's my view," he added.
Meanwhile, international benchmark Brent crude fell more than 2% on Friday and U.S. crude was slightly lower. Israeli Prime Minister Benjamin Netanyahu reportedly ordered the Jerusalem military to strike "strategic targets" in Iran as well as "government targets."
Investors remain on edge as the conflict between Israel and Iran has yet to cool. President Donald Trump is considering whether to intervene directly in a strike against Tehran, and the White House said Thursday that he will make a final decision in the next two weeks. Previously, Trump had called for Tehran to surrender completely, but Iran's Supreme Leader Ayatollah Ali Khamenei called the call "threatening and ridiculous."
Before we know how the stock market will respond to this geopolitical shock, there are several key questions that need to be answered, including how much damage will be done to Iran's energy infrastructure and for how long, whether Iran's nuclear capabilities will be completely destroyed, and whether the current regime will remain in power.
As tensions in the Middle East continue to heat up, investors are also weighing a speech from Federal Reserve Chairman Jerome Powell on Wednesday. Stocks closed lower after Powell said the Fed is in no hurry to cut its benchmark interest rate and will continue to rely on economic data, especially as it is unclear how Trump's tariffs will affect the economy.
On Thursday, Trump slammed Powell again, saying the Fed chairman's delay in cutting interest rates would cost the U.S. "hundreds of billions of dollars."
For the week, the S&P 500 edged up 0.07%. The Dow fell 0.06% and the Nasdaq rose about 1%.
Tesla shares rose on Friday, just two days before the electric car maker is expected to launch its self-driving taxi service in Austin, Texas. Wedbush Securities analyst Dan Ives wrote in a note on Friday that he believes Tesla could be worth $2 trillion by the end of 2026 as self-driving cars take off.