U.S. stock futures rose Tuesday as investors balanced optimism over a potential deal to end the U.S.-Iran war against fresh American military strikes in the country.
Futures on the Dow Jones Industrial Average were up 234 points, equivalent to a 0.5% gain, while S&P 500 futures added 0.7% and Nasdaq $NDAQ-100 futures rose 1.1%. Monday's session was not held, as U.S. markets observed the Memorial Day holiday.
Tuesday morning saw Brent crude push back above $96 a barrel, a gain of roughly 3% that clawed back some of the ground lost when prices slid under $94 the previous session. West Texas Intermediate futures traded about 4% lower on the day. For investors, the $100 level carries symbolic weight — prior to Monday, Brent had not closed beneath that price in over a month.
On Monday, Trump offered an upbeat assessment of diplomatic efforts, telling reporters that Iran talks were going well, while also putting Tehran on notice that Washington was prepared to shift to an offensive posture if the process falls apart. At the same time, fresh military action unfolded: Tim Hawkins, the spokesman for U.S. Central Command, confirmed that American forces hit targets in southern Iran, among them missile launch infrastructure and watercraft believed to be engaged in mine-laying operations, framing the strikes as defensive moves taken within the bounds of an active ceasefire.
Hostilities escalated after American forces destroyed a pair of Islamic Revolutionary Guard Corps vessels accused of attempting to seed the Strait of Hormuz with mines, according to The Wall Street Journal.
Oil prices had already been falling before Tuesday's moves. The prior week dealt a significant blow to U.S. crude, which shed 8.4% — a decline not seen on a weekly basis since April 17, according to CNBC. Elevated energy costs have kept inflation concerns alive, and expectations for Fed relief have dimmed accordingly — CME $CME Group's FedWatch tool puts the probability of a July rate increase at 8.5%, a sharp rise from the 0.9% reading recorded a month earlier.
Despite a downward move in Treasury yields on Tuesday, the broader outlook for monetary policy has held steady, with roughly 60% of investors in CME's futures market anticipating at least one rate increase before the year is out, according to The Journal. Equities have been riding a run of consecutive weekly gains not matched since the end of 2023, buoyed by a corporate earnings season in which S&P 500 companies have collectively posted first-quarter profit growth exceeding 28%, a pace last surpassed in late 2021.