Futures tied to the major U.S. stock indices moved higher, as investors tried to assess the outlook for the expanding conflict in the Middle East. Oil prices remained above $100 a barrel amid reports of U.S. troop movements in the region and speculation that President Donald Trump is weighing a possible operation to remove uranium from Iran. At the same time, Trump signaled progress in discussions with Tehran and hinted that an agreement to end the fighting might be within reach.
Futures move higher
U.S. stock futures edged upward on Monday as the conflict with Iran entered its second month, leaving markets uncertain about how the situation could evolve.
By 03:30 ET, Dow futures had gained 93 points, or 0.2%. S&P 500 futures rose 18 points, or 0.3%, while Nasdaq 100 futures climbed 62 points, also up 0.3%.
Wall Street’s main indices had fallen in the previous session despite President Trump extending the deadline for Iran to reopen the Strait of Hormuz until April 6. The U.S. had warned that failure to comply could result in strikes against energy infrastructure.
“[M]arkets remain very much on edge about the Middle East, and the consensus view is still that the conflict is set to escalate,” analysts at Vital Knowledge wrote in a note to clients.
Brent oil climbs
With tensions continuing to build in the Middle East, the Wall Street Journal reported that Trump is considering a complicated and potentially risky military plan aimed at extracting nearly 1,000 pounds of uranium from Iran.
Meanwhile, troops from the U.S. 31st Marine Expeditionary Unit have reportedly been deployed to the region, a step seen as giving the president more strategic options as he evaluates the next stage of the war. According to the Washington Post, the Pentagon is preparing for the possibility of several weeks of ground operations inside Iran.
Tehran has warned that it will destroy any American forces attempting to carry out a ground incursion.
Over the weekend, at least 12 U.S. service members were injured in Iranian strikes on an air base in Saudi Arabia. Iran-aligned Houthi fighters in Yemen also entered the conflict for the first time, launching attacks on Israel and raising concerns about potential disruptions to major global energy routes.
Analysts at Vital Knowledge warned that if the Houthis target the Bab al-Mandab Strait, the global shipping disruption already triggered by the effective closure of the Strait of Hormuz off Iran’s southern coast could be “dramatically amplif[ied].” The Bab al-Mandab Strait is a key maritime chokepoint linking the Red Sea with the Gulf of Aden and the Indian Ocean.
By 03:45 ET, Brent crude futures had risen 3.3% to $108.77 per barrel.
Trump says Iran negotiations going “well”
Trump indicated that talks with Iran could be underway and suggested that a diplomatic agreement might be close.
Speaking to reporters aboard Air Force One, the president said negotiations were going “extremely well” and maintained that an agreement with Tehran remained possible. He also referred to “regime change” in Iran following U.S. strikes that killed several senior Iranian officials in recent weeks.
“I think we’ll make a deal with them, but it’s possible we won’t,” Trump said. Responding to a reporter’s question, he added: “I do see a deal with Iran, could be soon,” though he did not provide a timeline.
Iranian officials have largely denied that direct negotiations with Washington have taken place since the war began, insisting that hostilities must end before any talks can occur.
As has often been the case throughout the conflict, Trump’s remarks were accompanied by mixed signals. Alongside reports of a possible U.S. uranium extraction plan, the president told the Financial Times that he wants to take control of Iran’s oil and could even seize Kharg Island, one of the country’s main export hubs.
“Maybe we take Kharg Island, maybe we don’t. We have a lot of options,” Trump told the FT.
Gold edges higher
Gold prices ticked higher on Monday following a volatile week. Spot gold rose 0.8% to $4,527.01 an ounce by 03:55 ET, while gold futures increased 0.7% to $4,555.05 an ounce. Spot gold had dropped to around $4,000 an ounce last week before rebounding to near $4,500 by Friday.
Analysts at OCBC said the rebound from last week’s lows appeared largely technical. Gold had previously fallen as much as 20% from levels seen before the outbreak of the Iran conflict in late February.
They noted that bearish momentum appeared to be easing, with the metal’s relative strength index moving out of oversold territory.
However, they cautioned that it remains uncertain whether the recovery can continue, highlighting resistance levels for spot gold at $4,624, $4,670 and $4,850 per ounce.
U.S. data in focus this week
Investors are also preparing for several economic reports this week that could shed light on how the conflict with Iran is affecting the broader U.S. economy.
A fresh reading on U.S. manufacturing activity for March from the Institute for Supply Management is due on Wednesday. Economists expect the index to decline slightly while remaining in expansion territory.
Attention will then shift to Friday’s U.S. employment report. Economists forecast that the economy added about 56,000 jobs in March, rebounding from a loss of 92,000 in February. The unemployment rate is expected to remain steady at 4.4%.
The nonfarm payrolls report will likely attract particularly close attention, as it may influence how Federal Reserve officials approach monetary policy in the coming months.
“In terms of the U.S. data this week, the focus will be on the labor market,” analysts at ING said in a note. “Friday’s NFP release, […] should leave the market minded to price [Fed] tightening this year in response to the energy shock. Any surprise weakness could hit the dollar.”
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