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US stock futures turned higher on Monday, with oil prices paring gains as markets grew cautiously optimistic over Iran's next move after the US entered the Middle East conflict at the weekend.
Futures tied to the S&P 500 (ES=F) climbed 0.3%, while those on the tech-heavy Nasdaq (NQ=F) rose roughly 0.4%. Dow Jones Industrial Average futures (YM=F) edged up 0.1%.
Stocks are reversing course as nerves calm over President Trump's decision to join Israel's attacks on Iran. Futures on Wall Street rose and oil jumped over 4% higher in the immediate rush to grapple with the strikes, but the prospect of a selloff is receding as investors assess Iran's response so far.
"Markets appear to be treating the US strikes on Iran as a contained event for now, rather than the start of a broader war. The muted haven flows suggest investors are still assuming this is a one-off escalation, not a disruption to global oil supply or trade," Saxo strategist Charu Chanana told Reuters.
Trump said late Saturday that the US had struck Iran's three main nuclear enrichment facilities, claiming the sites had been "totally obliterated" — a claim that has since been questioned. He threatened Iran with more attacks if the country did not quickly seek peace talks.
The focus now is on Iran's next step — both militarily and diplomatically. Its foreign minister on Sunday said it reserves "all options," while its parliament has reportedly voted to block the Strait of Hormuz — though Iran's leaders have yet to make a final decision.
The spike in crude prices is now unwinding as jitters about disruption to energy supplies ease. Experts are skeptical that Iran will follow through on its threat to close the waterway, through which around one-fifth of global oil and gas flows.
Brent crude (BZ=F) futures pulled back on Monday, trading at near $77 a barrel after jumping over $80 after the US strikes. US benchmark WTI crude futures (CL=F) also lost hold of gains, slipping to below $74 a barrel.
Wall Street is watching oil prices closely, given a shock could have ramifications for the US economy, potentially triggering higher inflation that could spur the Federal Reserve to delay interest-rate cuts.
Elsewhere in markets, gold (GC=F) ticked lower amid a softening in the haven demand that has driven this year's sharp rally.
LIVE 7 updates
Good morning. Here's what's happening today.
Trending tickers: Wolfspeed, Northern Trust and Tesla
Here are some top stocks trending on Yahoo Finance in premarket trading:
Wolfspeed (WOLF) stock fell 11% in premarket trading on Monday after announcing it plans to file for bankruptcy in the US under a new restructuring agreement with its creditors. The agreement would provide fresh financing and slash debt by nearly 70%.
Northern Trust Corporation (NTRS) shares rose 4% before the bell after a report from The Wall Street Journal said that Bank of New York Mellon Corp had reached out to the asset and wealth manager and expressed interest in a merger.
Tesla (TSLA) stock rose over 1% in premarket trading after rolling out its driverless taxi service to riders on Sunday. The debut of the robotaxi was introduced to a handful of riders, which included retail investors and social-media influencers in Tesla's hometown of Austin.
Goldman estimates nearly the worst on oil prices
Most investors will awake today searching on Yahoo.com "Strait of Hormuz" after the weekend attacks from the US on Iran. For speed of analysis purposes, if this key oil shipping hub closes down (seems like it won't happen based on everything I am seeing this morning) it could really send oil prices skyrocketing.
Here's what Goldman's team estimates:
"If oil flows through the Strait of Hormuz were to drop by 50% for one month and then were to remain down 10% for another 11 months, we estimate that Brent would briefly jump to a peak of around $110."
Gold pushes to within $125 of record high before reversing gains
Gold pushed higher with the world in limbo as the US joined Israel's attack on Iran over the weekend. No formal response has been issued by Iran, with wider fallout expected.
Spot gold climbed 0.2% to $3,375.04 an ounce taking it to within $125 of its record high as investors sought safe-haven assets in a tumultuous economic situation.
Gold then sank 0.5% despite broader haven demand.
Bloomberg reports:
Wall Street reacts to US intervention in Israel-Iran war
Wall Street is closely watching escalating tensions in the Middle East after President Trump confirmed that the US launched a surprise strike on Iran’s nuclear sites late Saturday, marking the country’s official entry into the two-week-old conflict.
Markets have held mostly steady in the aftermath of the escalation, although US stock futures fell across the board when trading opened Sunday evening.
Additionally, bitcoin (BTC-USD) prices, often viewed as a barometer of risk appetite, dropped over 1.6% to trade around $100,500 a coin. WTI crude (CL=F) and Brent (BZ=F) futures jumped, trading near $76 and $79 a barrel, respectively, as uncertainty looms over the potential closure of the critical Strait of Hormuz despite ongoing threats from Iran.
The latest surge follows oil’s third consecutive week of gains on Friday.
"We wouldn’t be surprised to see this spark a risk-off reaction in US equities and will be watching the futures closely on Sunday evening and Monday morning," Lori Calvasina, head of US equity strategy research at RBC Capital Markets, wrote in a Sunday evening note to clients.
"It has been and remains our belief that the longer and broader the conflict becomes, the more challenging it could be for US equities," Calvasina added. "These escalations come at a tricky time for US equities, as the S&P 500 has looked fairly valued to us (perhaps a bit overvalued) from a fundamental perspective, with more room to run from a sentiment perspective."
The analyst said her three main concerns include: first, the risk that rising national security uncertainty could weigh on equity valuations; second, the possibility that renewed geopolitical tensions could stall the recovery in sentiment that began after the early April tariff lows; and third, the potential for a spike in oil prices, which could fuel inflation concerns.
In terms of sectors, Energy (XLE) tends to outperform when oils prices rise, while Consumer Discretionary (XLY) and Communication Services (XLC), along with Entertainment, Media, and Interactive Media, tend to lag behind the broader market, Calvasina noted.
Citi analyst Stuart Kaiser agreed that sharply higher oil prices remain "the channel for geopolitical risks to impact stock markets," identifying crude prices "well above $80 a barrel" as a critical threshold for concern.
Kaiser added that options markets are now pricing in a 10% chance that oil surges 20% over the next month, up from just 2.5% two weeks ago, reflecting mounting tail risks as the conflict deepens.
Still, the analyst pointed to resiliency in stocks amid the volatility, saying, "Markets powered through extreme oil volatility and unstable geopolitical headlines to post a risk-on week."
Will Iran shut the Strait of Hormuz? What to know about the 'worse-case scenario'
Oil prices rose Sunday evening, with investors taking stock of the US entry into the Israel-Iran conflict and how Iran might respond.
Much of the focus has turned to Iran's status as a major oil producer and whether it might seek to close the Strait of Hormuz, through which about one-fifth of the world's oil and gas flows.
Iran's parliament reportedly pushed for the strait's closure, though it left the ultimate decision up to Iran's top national security body.
That may be by design, as Yahoo Finance's Ben Werschkul details:
