U.S. equity futures are pointing to a higher open on Tuesday, suggesting markets may build on the strong gains recorded in the previous session.
Investor sentiment is being lifted by renewed optimism surrounding a potential second round of negotiations between the U.S. and Iran aimed at ending the Middle East conflict.
President Donald Trump said on Monday that Iranian officials had reached out to Washington about restarting discussions, stating, “They’d like to make a deal very badly.”
Expectations of renewed talks have weighed on oil prices, with U.S. crude futures dropping more than 3%.
“Previously, the narrative was straightforward: the longer the war dragged on, the worse the outlook for growth, inflation and risk assets,” said Daniela Hathorn, Senior Market Analyst at Capital.com. “Now, the dynamic appears to have flipped.”
“With a ceasefire framework still loosely in place and the US attempting to control the Strait, the absence of escalation, rather than the presence of conflict, is being treated as a positive signal,” she added. “In other words, each day without a major disruption to Gulf energy infrastructure is being read as incremental progress toward stabilization.”
Market confidence also received a boost from fresh economic data. Figures from the U.S. Department of Labor showed producer price inflation rose less than expected in March.
The producer price index for final demand increased 0.5% during the month, in line with a revised reading for February. Economists had forecast a larger 1.2% gain compared to the originally reported 0.7% rise in the previous month.
On a yearly basis, producer prices rose 4.0% in March, up from 3.4% in February, but still below expectations of 4.6%.
Stocks initially declined early in Monday’s session but staged a strong recovery as the day progressed, ending firmly in positive territory.
The Nasdaq climbed 280.84 points, or 1.2%, to 23,183.74, the S&P 500 advanced 69.35 points, or 1.0%, to 6,886.24, and the Dow Jones Industrial Average gained 301.68 points, or 0.7%, to 48,218.25.
Traders continue to monitor geopolitical developments after weekend talks between the U.S. and Iran failed to produce an agreement.
“They have chosen not to accept our terms,” said JD Vance at a brief press briefing, while noting that negotiations could still resume. Iranian officials said that “unreasonable U.S. demands” had hindered progress.
Markets largely brushed aside reports that President Trump had imposed a naval blockade on traffic entering and leaving Iranian ports.
U.S. Central Command confirmed that the blockade would apply to vessels from all countries operating in Iranian ports and nearby waters, including the Arabian Gulf and Gulf of Oman.
“Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz,” Trump said in a post on Truth Social.
He also stated that U.S. forces are “locked and loaded” and ready to “finish up the little that is left of Iran” at an “appropriate moment.”
Although these developments initially pushed oil prices higher, investors appear to believe that tensions will ease and a broader conflict can be avoided.
Attention is also turning to the start of earnings season, with expectations that corporate results will remain resilient despite geopolitical headwinds.
Sector-wise, software stocks rebounded strongly, lifting the Dow Jones U.S. Software Index by 4.6%, while computer hardware shares also advanced, with the NYSE Arca Computer Hardware Index gaining 4.4%.
Brokerage stocks posted solid gains as well, pushing the NYSE Arca Broker/Dealer Index up 2.9%.
Transportation, semiconductor, and networking stocks also moved higher, while utilities and natural gas shares lagged.
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