Stock futures declined Tuesday morning as investors closely watched the escalating conflict between Israel and Iran. Dow Jones futures fell 301 points (0.7%), S&P 500 futures dropped 0.6%, and Nasdaq 100 futures slipped 0.58%.
Monday evening saw former President Trump urging an immediate evacuation of Tehran via Truth Social, prompting a dip in U.S. futures. Meanwhile, crude oil prices rose about 2% overnight, reflecting heightened geopolitical risk.
Despite the overnight dip in futures, Monday’s regular trading session closed positively. The Dow gained over 300 points, the S&P 500 rose roughly 0.9%, and the Nasdaq Composite jumped 1.5%. This optimism was supported by easing oil prices, with Brent and West Texas Intermediate crude futures falling more than 1%, reversing Friday’s sharp rally following Israel’s airstrikes on Iran.
The conflict entered its fourth day as Iran reportedly sought help from Saudi Arabia and Qatar to pressure the U.S. into urging Israel for a ceasefire. This potential ceasefire could be linked to Iran’s willingness to be more flexible in nuclear negotiations.
Jeff Buchbinder, chief equity strategist at LPL Financial, said Israel’s immediate goal is to neutralize Iran’s nuclear threat, with a longer-term aim of regime change, which remains uncertain.
He noted that historical data from 25 geopolitical shocks since 1941 show stocks typically experience an average drop of 4.6% over about 19 days but recover to pre-event levels in roughly 40 days. Thus, such conflicts usually cause only a short-term market interruption.
Investors are also awaiting key economic data, including May retail sales on Tuesday and the Federal Reserve’s rate decision on Wednesday. Fed funds futures indicate a near certainty that the Fed will keep rates steady at 4.25% to 4.50%.
In summary, markets are cautious amid the Israel-Iran conflict but have shown resilience so far. Oil price volatility and geopolitical risks remain key factors influencing investor sentiment.
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