“A rebound in US pending home sales, deteriorating NY Fed general business activity index and plummeting German economic sentiment amid the Middle East conflict had little impact on financial markets ahead of Wednesday's Fed policy meeting and Powell's remarks," noted Axel Rudolph, chief technical analyst at IG.

"These will be closely watched for clues as to future policy, especially since the Reserve Bank of Australia hiked rates for a second time in as many months amid inflation pressures."

The shipping crisis has now turned into a supply crisis, according to XTB's research director Kathleen Brooks, as energy infrastructure across the Gulf is a target of Iranian attacks.

"In the last few hours the US embassy in Baghdad has been hit by Iraqi Shia militias, who are aligned with Tehran, the Shah gas field, one of the world’s largest, in the UAE was hit, and a tanker was also hit in the Gulf of Oman," Brooks noted.

"The conflict seems to be getting bigger, and it is unclear when or how it will end. This is likely to keep the oil price above $100 per barrel for some time."

US pending home sales surged in February, posting a 1.8% monthly increase, well above expectations for a 0.6% decline and reversing a 1.4% fall in the prior month, according to the National Association of Realtors. The rise suggests continued resilience in the housing market despite higher mortgage rates.

Meanwhile, private-sector job growth slowed. The ADP National Employment Report showed the US added just 9,000 jobs in March, down from 15,500 in the previous week, highlighting ongoing moderation in labor market momentum.

US stocks have opened higher, in line with Europe.

The Dow Jones is up 0.8%, with the S&P 500 and Nasdaq both climbing around 0.7%.

Top risers on the Dow are IBM, Goldman Sachs and American Express, all up just over 2%. Salesforce, Disney and Boeing are next.

Less than 10 of the Dow constituents are in the red, led by Johnson & Johnson and Verizon.

US futures pushed into positive territory on Tuesday as headlines from the Middle East continued to prop up energy prices, while the Federal Reserve begins its two-day policy meeting.

Dow Jones futures were up 0.3%, with the S&P 500 and Nasdaq futures pointing to 0.2% rises, having all previously been down around 0.5-0.6%.

A day earlier, all three major indexes posted gains as investors balanced geopolitical jitters with optimism from tech earnings, with the Nasdaq leading the charge, climbing 269 points or 1.2% to 22,374, the S&P 500 added 1% to reach 6,699, while the Dow Jones rose 388 points or 0.8% to 46,946.

Front-month crude oil prices were remaining elevated, with WTI crude going for $95.60 a barrel.

Earlier today, the United Arab Emirates revealed a drone had struck the Shah upstream oil and gas field, while elsewhere, a tanker was reported to have struck near the port of Fujairah in the Gulf of Oman, and Iraqi officials also said a drone had hit a hotel in Baghdad.

A drone and rocket attack targeting the US embassy was reported in Iraq’s capital, Baghdad, while Israel said it killed the Iranian national security chief, Ali Larijani, in overnight strikes, but some reports suggest he could only be injured.

Financial markets have shown resilience despite concern about rising global energy prices, said market analyst David Morrison at Trade Nation.

He said tech sector sentiment has been supported by optimism around AI after Nvidia’s Jensen Huang said demand for its new chips could reach US$1 trillion, in his opening remarks at the start of its annual four-day GTC developer conference.

"There’s one overarching event which is weighing on sentiment, and which is proving difficult to handicap. The US/Israeli war on Iran has entered its third week. The Trump administration continues to insist that the US is overwhelming its opponent. And yet the Strait of Hormuz remains blocked to traffic, thereby cutting off around a fifth of the world’s supply of oil and liquified natural gas (LNG)."

He noted that President Trump, who just over a week ago rebuffed UK Prime Minister Starmer’s offer of a battleship, saying the war was "already over", was now demanding European nations and others that benefit from the oil and LNG which passes through the Strait to come and defend it, a call that has been rebuffed,"the argument being that no one asked for this war, and as the US started it, they should finish it".

As far as financial markets are concerned, Morrison says the ‘risk-off’ sentiment is likely to "prevail for as long as the Strait of Hormuz is blocked".

Today, US investors will be keeping an eye on earnings from Lululemon, DocuSign and Oklo.

Tomorrow brings the latest update on wholesale inflation, followed by the Fed’s policy decision.