U.S. stock futures dipped on Tuesday amid escalating tensions in the Middle East, where ongoing clashes between Israel and Iran have investors cautious. While hopes persist for a ceasefire, discussions reportedly continue behind the scenes, including potential talks between U.S. officials and Tehran. Meanwhile, U.S. President Donald Trump left the Group of Seven summit in Canada early, denying that his departure was related to ceasefire negotiations. On the economic front, attention turns to U.S. retail sales data due later in the day, while the Bank of Japan announced a slower pace for tapering its monthly bond purchases starting next fiscal year.
Futures Fall as Geopolitical Risks Weigh
By early Tuesday morning, Dow futures were down 330 points (0.8%), S&P 500 futures slipped 0.7%, and Nasdaq 100 futures dropped by 157 points (0.7%). This comes after Wall Street posted gains Monday, as analysts noted some easing of concerns regarding the Israel-Iran airstrike exchanges.
Trump’s comments at the G7 summit have added some optimism around new trade deals, especially with Canada, despite ongoing tariff issues. Canada, a major supplier of steel and aluminum to the U.S., faces existing tariffs, but talks are underway that could lead to an updated economic and security agreement within a month. Trump also signed a trade deal with the UK that reduces some import tariffs, though steel and aluminum levies remain contentious.
Intensifying Conflict in the Middle East
Israel’s military announced several extensive strikes on Iranian military targets, including missile storage and launch facilities in western Iran. Additionally, Israeli forces claimed to have killed a senior Iranian general in Tehran overnight, though Iran has not confirmed this. Reports indicate U.S. officials are exploring the possibility of nuclear deal talks with Iran, involving envoys from both sides, as an effort to reduce tensions. However, Iran reportedly demands that Israel halt its airstrikes before agreeing to negotiations.
President Trump has maintained a tough stance, warning civilians to evacuate Tehran and insisting Iran must not enrich uranium, despite Tehran’s assurances that it is not pursuing nuclear weapons.
Oil and Gold Prices Steady
Oil prices saw a slight increase amid the turmoil, while gold remained stable, continuing to serve as a safe haven amid geopolitical uncertainty.
Trump’s Early Exit from G7
Trump left the G7 summit ahead of schedule, denying that the move was linked to ceasefire talks, describing his departure as related to “something much bigger.” Prior to his exit, G7 leaders issued a statement urging a de-escalation of the conflict but reaffirmed support for Israel, condemning Iran as a destabilizing force in the region.
Focus Shifts to U.S. Retail Sales
Investors await the release of U.S. retail sales figures for May, with economists forecasting a 0.5% decline month-over-month following a 0.1% gain in April. Despite concerns over tariffs, consumer sentiment in the U.S. improved in June—the first increase in six months—due in part to hopes for easing trade tensions with China. However, rising geopolitical risks and potential spikes in oil prices could threaten this fragile optimism.
Bank of Japan Slows Bond Purchase Tapering
The Bank of Japan kept interest rates steady at 0.5% as expected and announced plans to slow its tapering of monthly bond purchases starting April 2026, reducing the pace from 400 billion yen to 200 billion yen per quarter. This cautious approach aims to balance economic support while minimizing market disruption amid challenges posed by U.S. trade tariffs.
The BOJ’s decision comes ahead of several key central bank meetings this week, including the U.S. Federal Reserve’s policy announcement on Wednesday.
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