March 18 (Reuters) - U.S. stock index futures rose on Wednesday, buoyed by a modest drop in oil prices, while jittery investors awaited an update on the monetary policy and the economy from the Federal Reserve to assess the impact of the Middle East conflict.
Sentiment was also lifted by signs of strong demand for infrastructure powering artificial intelligence tools, with both Nvidia and Advanced Micro Devices gaining 1% each in premarket trading.
Nvidia won Beijing's approval to sell its second-most
powerful artificial intelligence chips in China, and is also preparing a version of the Groq AI chip for the Chinese market, according to a report.
AMD signed an agreement with Samsung Electronics to expand their strategic partnership on memory chip supplies for AI infrastructure.
All eyes will be on the Fed, which is expected to leave benchmark interest rates unchanged at the end of its two-day meeting at 2 p.m. ET.
The greater focus, however, will be on Chair Jerome Powell's remarks on how tariffs, higher energy costs due to the current crisis in the Middle East and a weakening job market will influence monetary policy decisions later this year.
Traders are anticipating the Fed to delay its first interest rate cut this year to December from July, according to LSEG-compiled data.
"Our economists suspect the FOMC will trim growth forecasts marginally, push up its inflation forecast and then delay the 2026 rate cut until 2027," said Benjamin Schroeder, senior rates strategist at ING.
"That said, given the situation, the Fed will likely have little conviction in its forecasts, and Chair Powell will be certain to underline the challenges in the current volatile environment."
Producers' prices data for February is due at 8:30 a.m. ET, which will give policymakers a final look at how underlying price pressures are faring before they unveil their decision.
At 05:08 a.m. ET, Dow E-minis were up 268 points, or 0.57%, and S&P 500 E-minis were up 35.5 points, or 0.53%. Nasdaq 100 E-minis were up 165.75 points, or 0.67%.
Meanwhile, the conflict in the Middle East showed no signs of easing, and despite a slight drop, crude prices were still near $100 a barrel.
However, investors welcomed the temporary relief to supply constraints as sources said a deal was struck to resume crude exports from Iraq's Kirkuk fields to Turkey's Ceyhan port via a pipeline.
Travel stocks such as Delta, American and Carnival rose more than 1% each, building on Tuesday's rebound after the airlines raised their current-quarter forecast on hopes that strong demand will offset a rise in fuel-related operating costs.
The Middle East conflict has exacerbated volatility in global markets; however, U.S. stocks have been buoyed by a rebound in technology shares and on relief that the U.S. is a net energy exporter.
Wall Street's fear gauge, the CBOE VIX index has eased to two-week lows after touching April 2025 highs earlier this month, while the benchmark S&P 500 logged its first two straight days of gains in three weeks on Tuesday.
Among others, Lululemon lost 2% after forecasting 2026 revenue and profit below analysts' estimates. The yoga-wear maker, which is in the middle of a proxy fight, appointed a former chief of Levi Strauss to the board.
Drone autonomy software company Swarmer surged 50%, a day after its Nasdaq debut.
Micron gained 2.7% ahead of its earnings later in the day, and SanDisk added 2.8%.
(Reporting by Johann M Cherian in Bengaluru; Editing by Anil D'Silva)
