Futures tied to the major U.S. equity benchmarks edged slightly lower, while oil prices resumed their climb as fighting involving Iran continued. The renewed tension comes despite U.S. President Donald Trump announcing a temporary pause in planned American strikes on Iran’s power infrastructure. Fresh attacks have been reported across parts of the Middle East, while Tehran has rejected Trump’s assertion that the two sides had held “good” discussions about ending the conflict. Investors are now focusing on upcoming U.S. business activity data, which may offer early insight into how the war is affecting the wider economy.
Futures trade cautiously
U.S. equity futures moved little on Tuesday as markets tried to gauge the outlook for the Iran conflict following Trump’s decision to delay military action targeting Iranian power plants.
As of 04:20 ET, Dow futures were down 25 points, or 0.1%, while futures on the S&P 500 and Nasdaq 100 were broadly flat.
The main Wall Street indices finished higher in the previous session after Trump said Washington had conducted “productive” talks with Tehran. Iranian officials quickly disputed the claim, accusing the U.S. president of fabricating the story in order to calm volatile markets.
“[T]here is a ton of skepticism about the conflict coming to an end anytime soon,” analysts at Vital Knowledge wrote in a note to clients. They suggested equities could continue to advance but cautioned that the S&P 500 may face a “hard ceiling” between 6,900 and 7,000. The benchmark closed Monday at 6,565.55.
Fresh attacks across the region
Any hopes that Trump’s announcement might signal an imminent end to the conflict were tempered as new missile strikes were reported across the Middle East.
Media reports indicated that multiple locations in Israel, including areas of Tel Aviv, came under attack. The Wall Street Journal also reported that Kuwait and Saudi Arabia had been targeted by drone and missile strikes, while Israel said it had carried out strikes on sites in Lebanon associated with Iran-backed Hezbollah.
The Strait of Hormuz remains a central concern. The strategic shipping route south of Iran, through which roughly one-fifth of global oil supply flows, has effectively remained closed to tanker traffic. The disruption has become a major flashpoint in the joint U.S.-Israeli campaign against Iran and threatens to restrict vital energy supplies, particularly for Asian importers.
Oil prices have surged in response, heightening fears that a new wave of global inflation could emerge and force central banks to reconsider tightening monetary policy.
Brent crude futures, the global benchmark, briefly dropped below $100 per barrel after Trump’s announcement — the first time this had happened in weeks. Nevertheless, prices remain well above levels seen before the war, when Brent traded around $70 per barrel.
At 04:34 ET, Brent futures for May delivery were up 1.6% at $101.58 per barrel.
Gold stabilizes
Gold prices steadied during European trading, as the earlier pullback in oil prices helped the precious metal recover some of its recent losses.
Gold had been under sustained pressure in recent sessions after rising energy costs stoked fears that inflation could remain elevated.
As a result, markets have trimmed expectations for interest-rate cuts, with investors increasingly anticipating that central banks — including the Federal Reserve — will keep borrowing costs higher for longer.
Higher interest rates typically weigh on gold because the metal does not generate income, making yield-bearing assets such as government bonds relatively more attractive.
Spot gold was last down 0.1% at $4,403.98 an ounce by 04:52 ET.
Dollar supported
The U.S. dollar held firm as traders evaluated conflicting messages coming from Washington and Tehran.
The uncertain outlook and renewed fighting have reinforced demand for the greenback as a safe-haven asset.
After falling close to a two-week low following Trump’s social media post on Monday, the dollar index — which measures the currency against a basket of major peers — was up 0.3% at 99.25 by 04:48 ET.
“The dollar continues to be bounced around by the latest headlines on the war in the Middle East,” analysts at ING said in a note. “Traders will be eager to hear, particularly from the Iranian side, whether there is any realistic chance of ceasefire negotiations getting started. Until then, any further rally in risk assets and sell-off in the dollar will prove limited.”
U.S. flash PMIs due
On the economic front, investors are awaiting the release of the U.S. flash purchasing managers’ index for March.
The data should provide one of the earliest indications of how the Iran conflict is affecting business conditions, analysts at Vital Knowledge said.
Last week, Federal Reserve Chair Jerome Powell stated that it was “too soon to know the scope and duration of the potential effects on the economy” resulting from the conflict, although he warned that higher energy prices are likely to lift inflation in the near term.
Markets are also awaiting a weekly employment indicator from payroll processor ADP. Signs of weakness in the U.S. labor market, combined with the risk that an energy shock linked to Iran could push inflation higher again, are key concerns for Federal Reserve officials as they consider the future direction of interest rate policy.
