US stock futures rise as Mideast conflict remains in focus
US stock futures rose on Monday as investors monitored the Middle East conflict and potential diplomatic talks. Energy shares gained as oil prices climbed.
Equity index futures in the United States edged higher on Monday morning as investors attempted to recover from a sharp selloff while remaining focused on the escalating conflict in the Middle East. The geopolitical situation intensified over the weekend as the Yemen based, Iran-backed Houthi militia entered the war, coinciding with the arrival of additional American troops in the region. Tensions regarding Iran were further stoked by comments from the U.S. presidency concerning regional oil interests, though market participants found some relief in reports that Pakistan is acting as an intermediary for potential diplomatic discussions.
Energy markets reacted to the instability with rising oil prices, providing a lift to major petroleum firms in premarket trading. Exxon Mobil Corporation and Chevron Corporation both saw their shares increase by approximately 1.4%. Stefan Koopman, a senior macro strategist at Rabobank, noted that the market is currently balancing the risks of supply disruptions against broader economic impacts. He cautioned that actions such as seizing Kharg Island would likely restrict export capacity and drive global energy prices even higher.
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.
Wall Street is looking to stabilize after a difficult period that saw the Dow Jones Industrial Average enter correction territory, defined as a 10% drop from its record high. The Nasdaq and Russell 2000 have also confirmed similar declines since the onset of the conflict. Amidst this volatility, Morgan Stanley adjusted its stance on global equities to equal weight, though it observed that the U.S. market has seen a significant influx of capital as investors seek a safe haven.
Inflationary pressures driven by the spike in oil prices have shifted expectations for monetary policy. Market data now suggests that the Federal Reserve is unlikely to implement interest rate cuts this year, a significant shift from the two cuts anticipated prior to the conflict. This week, which is shortened by the Good Friday holiday, investors will scrutinize labor market data, including March nonfarm payrolls, and listen for insights from Federal Reserve officials for clues on the economic trajectory.
In other sectors, aluminum producers saw substantial gains as the price of the metal reached four-year highs. Alcoa Corporation climbed 8.4% before the bell, while Century Aluminum Company rose 7.2%. By 05:25 a.m. ET, Dow E-minis were up 156 points, S&P 500 E-minis gained 26 points, and Nasdaq 100 E-minis advanced 87.75 points.
