Stock futures climb 0.4% as U.S., Iran return to peace talks

U.S. equity futures edged higher Monday after Washington and Tehran agreed to resume peace negotiations, cooling oil prices and reversing some of last week's risk-off rotation that dragged the Nasdaq into a correction.

S&P 500 futures rose 0.4% in early European trading as the U.S. and Iran agreed to halt hostilities and return to peace talks, easing the geopolitical risk premium that had pushed oil prices to multi-month highs.

"The market can take some relief in the lower oil prices and its impact on the global economy," said Mohit Kumar, chief European economist at Jefferies. "Lower oil prices should lead to a diversification trade and growth-sensitive sectors which have suffered in the last few months should outperform."

Brent crude edged up 0.8% to $72.57 a barrel in early trading before paring gains to trade little changed at $72.20, down 22% for the month. The dollar index held at 101.25, just below the one-year high touched last week, while gold fell 0.6% to $4,061 an ounce, heading for a 13% quarterly decline — its steepest since 2013.

The Strait of Hormuz handles about 21% of global oil trade, and any disruption risks reigniting inflation pressures that have already forced investors to price in at least one Federal Reserve rate hike this year — a sharp reversal from the two cuts expected before the conflict began. Bank of America strategists anticipate three hikes, a view partly reflecting strong U.S. jobs growth.

The weekend escalation saw the U.S. strike Iranian missile and drone storage locations and coastal radar sites after Tehran carried out strikes along the Strait of Hormuz. President Donald Trump then threatened to annihilate Iran in a Truth Social post. A Pakistani source involved in the talks said negotiations are on hold, though all sides are keeping representatives in Switzerland to resume discussions.

The last time U.S.-Iran tensions escalated to direct military strikes in early 2020, Brent crude spiked above $70 a barrel within days before retreating 15% over the following month as diplomatic channels reopened. The S&P 500 fell 3% in the week after that incident before recovering those losses within two weeks.

Tech Selloff Pauses After Nasdaq's 4.6% Weekly Rout

Futures for the tech-heavy Nasdaq rose 1% on Monday, putting the index on track for a rebound after it slumped more than 4% last week. The S&P 500 shed nearly 2% last week while the Dow Jones Industrial Average bucked the trend with a 0.6% advance, as investors rotated out of megacap technology stocks into defensive sectors. Nvidia and Alphabet each lost more than 8% last week, while Meta Platforms, Apple and Amazon dropped more than 4%.

"Investors seem to be experiencing AI fatigue," wrote Ed Yardeni, president of Yardeni Research. "They are questioning whether the hyperscalers' massive spending on AI infrastructure will ever pay off."

Rate Hike Bets Reshape Currency and Commodity Markets

The yen weakened to 161.80 per dollar, hovering near its lowest in 40 years, as fears of another bout of intervention from Tokyo kept the fragile currency from breaching that threshold. The rising dollar has weighed on gold, which is on track for its biggest quarterly drop since 2013. European stocks edged higher, with the STOXX 600 rising 0.1%, while Asian markets pared earlier losses, with Japan's Nikkei up 0.15% and South Korea's KOSPI down 0.2%.

The resumption of peace talks removes a key source of uncertainty that had driven a 22% monthly decline in Brent crude and fueled a rotation out of growth stocks. If diplomacy holds, lower energy costs could ease inflation pressures and reduce the case for further Fed tightening, potentially supporting a broader market recovery. The next catalyst will be whether the Switzerland-based negotiations produce a formal ceasefire agreement.

This article is for informational purposes only and does not constitute investment advice.