The S&P 500 Index gained 0.6% at 9:43 a.m. in New York, with the benchmark teetering between a weekly gain or loss. The tech-heavy Nasdaq 100 Index advanced 0.8%. The VIX Index hovered around 19.

In an interview on CNBC, Fed Governor Christopher Waller said Friday that the central bank could lower interest rates as soon as next month, reiterating his view on the inflation hit from tariffs likely being short-lived. Waller said economic data shows GDP growth and inflation are running close to the Fed's targets.

"I think we've got room to bring it down, and then we can kind of see what happens with inflation," Waller said, adding the central bank could pause cuts if needed due to a shock from events, such as the crisis in the Middle East.

The comments follow the Fed's decision on Wednesday to keep interest rates on hold. Fed officials continued to pencil in two interest-rate cuts this year, though new projections showed a growing divide among policymakers over the trajectory for borrowing costs as tariffs make their way through the U.S. economy. Officials also downgraded estimates for economic growth this year and projected higher inflation. 

"The Fed appears to be keeping all options open, which we believe helps support market confidence in a rapidly changing geopolitical environment," said Brian Buetel, managing director at UBS Wealth Management.

President Donald Trump indicated on Thursday that a decision on striking Iran would be made within two weeks, but signaled that he would give diplomacy a chance. Trump, who is scheduled to attend a national security meeting in the Oval Office on Friday, has publicly mused for days about the US joining the conflict with Israel and Iran.

Hostilities between those countries continued for an eighth day. Iran on Friday restated that it would not negotiate with the U.S. while an Israeli attack continues. The only way to end the imposed war is to "unconditionally stop" the enemy's aggression, Iranian President Masoud Pezeshkian said in a post on X. 

"There were already a lot of unknowns for investors to contend with and we've added another with the Israel/Iran conflict," wrote Tom Essaye, founder of The Sevens Report newsletter. "Those unknowns will act as a weight on equities near term and make rallies a bit harder to manufacture, but these unknowns are not, by themselves, enough to cause a correction."

Among singular stocks, Olive Garden owner Darden Restaurants Inc. rose after the company reported comparable sales growth that topped estimates and authorized a new $1 billion share buyback program. Meanwhile, Kroger Co. shares advanced after sales surpassed expectations, providing a sign that consumers are still spending on groceries and other essentials, even amid economic turbulence. Accenture plc fell as analysts flagged bookings as a weak spot.

"It's important for investors to stay disciplined in the second half of this year, which could be defined by more volatility based on geopolitical tensions and elevated headline risk," said UBS Wealth Management's Buetel. "Maintaining portfolio diversification without reacting to short-term noise is the name of the game for 2025."