Stock futures tied to Wall Street’s major indexes each jumped more than 1% Monday morning after investors welcomed a preliminary agreement between the United States and Iran to end a conflict that had lasted more than three months and to reopen the strategically important Strait of Hormuz.
While the framework agreement signals progress, it leaves unresolved significant issues including Iran’s nuclear program and the ongoing conflict between Lebanon and Israel. Officials expect the deal to be formally signed this Friday in Switzerland.
Oil prices reacted sharply to the announcement, falling more than 4% to their lowest point since March. The drop is expected to draw attention to stocks that are sensitive to energy costs, including airlines, cruise lines such as Delta and Norwegian Cruise, and energy companies like Occidental and Exxon when markets open later Monday.
Max Kettner, chief multi-asset strategist at HSBC Global Investment Research, offered a measured take on the development. “If the overnight news of a deal between the U.S. and Iran proves to be credible and lasting, this should be taken as a positive, whereas setbacks will likely be taken as less of a negative by risk assets,” he said.
Despite the optimism, analysts are cautioning that Brent crude prices may still hover near $80 per barrel even after the resolution, as energy shipments resume through the Strait and Middle Eastern nations work to restore infrastructure that was damaged during the conflict.
Economic data released last week showed that elevated energy costs had begun working their way into consumer prices, putting additional attention on the Federal Reserve’s upcoming monetary policy meeting. The yield on the benchmark 2-year Treasury note dropped 7 basis points to a two-week low, reflecting shifting interest rate expectations.
The Fed is widely anticipated to hold interest rates steady at this week’s meeting, though traders still expect the central bank to raise borrowing costs by at least 25 basis points before the end of the year, based on data from the CME Group’s FedWatch tool.
As of 4:03 a.m. ET, Dow E-minis were up 519 points, or 1.01%. S&P 500 E-minis gained 94.5 points, or 1.27%, and Nasdaq 100 E-minis rose 622 points, representing a 2.1% increase.
SpaceX shares climbed 6% in premarket trading following the company’s successful stock market debut. Led by Elon Musk, the company’s shares closed at $160.95 on their first day of trading, up from an IPO price of $135. The smooth launch on the Nasdaq was seen as a relief across Wall Street and is being viewed as a model for the anticipated IPOs of OpenAI and Anthropic later this year.
All three major indexes finished last week with gains, even after artificial intelligence-related stocks came under pressure early in the week. Analysts attributed that sell-off to the tech sector’s sensitivity to higher interest rates and to investors repositioning ahead of the SpaceX IPO.
This week, market watchers will also be focused on Fed Chair Kevin Warsh’s first meeting leading the central bank. Investors are closely watching his communication approach and looking to economic and interest rate projections for clues about where borrowing costs are headed.
Among other notable early movers, Paramount Skydance shares rose 5.8% after the U.S. Justice Department approved the company’s acquisition of Warner Bros.
