Global markets traded cautiously as escalating Middle East hostilities and uncertainty ahead of the U.S. Federal Reserve’s monetary policy decision later in the day prompted investors to hold back on fresh bets.

Wall Street futures were in positive territory, while TSX futures followed sentiment higher. U.S. markets will be closed tomorrow for the Juneteenth holiday.

In Canada, investors are getting results from Aurora Cannabis Inc.

On Wall Street, markets are watching earnings from Smith & Wesson Brands Inc.

“Clearly the Middle East issues have not been solved, and comments by [U.S.] President [Donald] Trump just mean that things could get more dangerous in that part of the world,” said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia (CBA).

“The markets are trying to figure out that risk of a big U.S. military intervention. It’s hard to say exactly what the market is thinking, but ... they’re certainly pricing in at least some risk that something goes very bad there.”

Overseas, the pan-European STOXX 600 was down 0.13 per cent in morning trading. Britain’s FTSE 100 rose 0.11 per cent, Germany’s DAX slipped 0.13 per cent and France’s CAC 40 advanced 0.09 per cent.

In Asia, Japan’s Nikkei closed 0.9 per cent higher, while Hong Kong’s Hang Seng fell 1.12 per cent.

Oil prices fell after a gain of 4 per cent in the previous session, as markets weighed the chance of supply disruptions from the Iran-Israel conflict against a U.S. Federal Reserve rates decision that could impact oil demand.

Brent crude futures dropped 1.2 per cent to US$75.52 a barrel. West Texas Intermediate (WTI) crude futures slid 1.2 per cent to US$73.96 a barrel.

“Material disruption to Iran’s production or export infrastructure would add more upward pressure to prices,” Fitch analysts said in a client note.

“However, even in the unlikely event that all Iranian exports are lost, they could be replaced by spare capacity from OPEC+ producers.”

In other commodities, spot gold fell 0.3 per cent to US$3,379.10 an ounce. U.S. gold futures slid 0.3 per cent to US$3,396.90.

The Canadian dollar strengthened against its U.S. counterpart.

The day range on the loonie was 73.02 US cents to 73.28 US cents in early trading. The Canadian dollar was up about 1.45 per cent against the greenback over the past month. 

The U.S. dollar index, which weighs the greenback against a group of currencies, declined 0.2 per cent to 98.62. 

The euro climbed 0.25 per cent to US$1.1511. The British pound advanced 0.26 per cent to US$1.3464.

In bonds, the yield on the U.S. 10-year note was little changed at 4.386 per cent.

(8:30 a.m. ET) Canada’s monthly credit aggregates for April.

(8:30 a.m. ET) U.S. housing starts for May.

(8:30 a.m. ET) U.S. building permits for May.

(11:15 a.m. ET) Bank of Canada Governor Tiff Macklem speaks in St. John’s.

(2 p.m. ET) U.S. Fed announcement and Summary of Economic Projections with Chair Jerome Powell’s press briefing to follow.

With Reuters and The Canadian Press