Wall Street futures began the shortened trading week with modest gains Monday morning, recovering from steep losses in the previous session as investors continue evaluating the growing Middle East crisis.
Over the weekend, Yemen’s Iran-backed Houthi forces joined the conflict while additional U.S. military personnel deployed to the region. President Donald Trump stated in a Financial Times interview that he wanted to “take the oil in Iran.”
However, markets found some reassurance in Trump’s remarks that the U.S. and Iran have been conducting meetings “directly and indirectly,” with Pakistan serving as a go-between and indicating that “meaningful talks” could occur in the coming days.
“The market is grappling with two major unknowns that feed directly into each other: when oil flows will resume in meaningful volumes, and at what price level oil switches from an inflation story to a recession story,” explained Stefan Koopman, senior macro strategist at Rabobank.
Koopman added that capturing Iran’s Kharg Island would restrict export capabilities and drive global oil costs even higher.
Energy markets continued their upward trend Monday, with oil company stocks posting gains. Exxon Mobil and Chevron each rose approximately 1.4% in early trading.
Major market indices concluded their fifth straight week of losses Friday, with the Dow Jones officially entering correction territory after dropping more than 10% from its peak. Both the Nasdaq and Russell 2000 small-cap index have also confirmed corrections since hostilities began, while the S&P 500 sits just over 1% away from that threshold.
Investment firm Morgan Stanley reduced its global equity rating to “equal weight” from “overweight,” though analysts noted that money flowing into U.S. stocks and bonds has surpassed other regions since the conflict started, suggesting America may again serve as an investor safe haven.
As of 5:25 a.m. Eastern Time, Dow futures climbed 156 points or 0.34%, S&P 500 futures gained 26 points or 0.41%, and Nasdaq 100 futures advanced 87.75 points or 0.38%.
Trading floors will remain closed Friday for the Good Friday holiday.
Rising oil costs from the Iran situation have renewed concerns about inflation, creating challenges for central banks regarding interest rate decisions.
Market watchers no longer expect Federal Reserve rate cuts this year, a shift from predictions of two reductions before the war started, according to CME Group’s FedWatch Tool.
Several employment reports including March nonfarm payroll numbers are due this week, potentially offering fresh economic health indicators.
Investors will also closely examine remarks from Fed Chair Jerome Powell and New York Fed President John Williams scheduled for later Monday.
Aluminum producer shares climbed in pre-market activity as metal prices reached four-year highs. Alcoa jumped 8.4% while Century Aluminum gained 7.2%.
