- Stock futures saw an increase on Sunday, with investors considering the consequences of the intensifying Israel-Iran dispute, which currently offers no apparent de-escalation paths. Oil prices surged following Israel's strikes on significant parts of Iran's energy facilities over the weekend, and Tehran indicated that blocking the Strait of Hormuz is being seriously contemplated. Federal Reserve policymakers are scheduled to convene this coming week.
U.S. Stock futures indicated a recovery Sunday evening, climbing as the intensifying Israel-Iran conflict appears to lack any clear de-escalation paths.
TL;DR
- Stock futures rose Sunday as the Israel-Iran dispute intensifies with no clear de-escalation paths.
- Oil prices surged after Israel struck Iran's energy facilities; Strait of Hormuz closure is considered.
- Federal Reserve policymakers will convene this week, focusing on inflation, tariffs, and geopolitical instability.
- Concerns about inflation resurfaced with rising oil costs, impacting Treasury yields and currency values.
On Friday, stocks experienced a significant decline following Israel's initiation of an air offensive targeting Iran's senior military figures, nuclear installations, and various military sites across the nation.
Throughout the weekend, both parties persisted with their shelling, with significant locations in Iran’s energy infrastructure becoming more frequent targets. These include facilities for refining oil, storage sites for fuel, and a substantial natural gas extraction area.
Dow Jones Industrial Average futures turned upward, gaining 44 points, or 0.1%. S&P 500 futures saw a 0.14% increase, and Nasdaq futures climbed 0.20%.
U.S. Oil prices moderated their earlier advances, increasing by 1.1% to reach $73.79 a barrel, while Brent crude saw a 1% increase, trading at $74.94. This follows a significant 7% surge in oil prices last Friday, driven by market responses to the initial developments in the Israel-Iran conflict.
An Iranian lawmaker said over the weekend that closure of the Strait of Hormuz, a critical chokepoint in the global energy trade, was under serious consideration. The equivalent of 21% of global petroleum liquids consumption, or about 21 million barrels per day, flows through the strait.
George Saravelos, head of FX research at Deutsche Bank, stated in a Saturday note that a total cutoff of Iranian oil and a blockage of the Strait of Hormuz could potentially push oil prices past $120 per barrel in a worst-case scenario.
The 10-year Treasury yield decreased by 0.9 basis points, reaching 4.415%. The U.S. Dollar weakened by 0.17% versus the euro and 0.17% against the yen. Gold prices climbed 0.2%, settling at $3,459.90 per ounce.
Rising oil costs rekindled concerns about inflation, precisely when consumer price figures indicated that President Donald Trump’s tariffs had little effect to date.
The 10-year yield saw upward pressure on Friday as expectations for Federal Reserve rate cuts later this year faded.
When Fed policymakers convene this Tuesday and Wednesday, inflation, tariffs, and the unstable geopolitical situation will be primary concerns.
Although rate adjustments aren't anticipated, a new set of projections for future rates and economic indicators will be published. Chairman Jerome Powell is scheduled to conduct a press briefing on Wednesday afternoon.