US stock futures surged on Monday as investors welcomed a breakthrough deal to end US-Iran hostilities and reopen the Strait of Hormuz at the start of a holiday-shortened trading week.
Contracts on the tech-heavy Nasdaq 100 (NQ=F) led the advance, soaring 2.1%, while S&P 500 futures (ES=F) jumped 1.3%. Dow Jones Industrial Average futures (YM=F) climbed 1% on the heels of Friday’s solid gains for Wall Street stocks.
The US announced late Sunday that it had reached a ceasefire deal with Iran, with President Trump calling the agreement “complete” in a post to Truth Social. Talks on a final peace deal are expected to begin within 60 days.
The provisional agreement should restore oil shipping through the crucial Strait of Hormuz waterway, but a return to normal flows is seen as months away. The two sides are set to meet on Friday in Switzerland to formally sign the deal, but a lack of detail about its terms is keeping tanker owners and other operators wary.
Oil prices tumbled roughly 5%, with global benchmark Brent crude futures (BZ=F) hovering just above $83 a barrel. West Texas Intermediate (CL=F) futures fell to around $80 barrel as concerns over supply disruptions eased.
Wall Street enters the week with momentum following SpaceX’s (SPCX) blockbuster public debut on Friday. Shares of the Elon Musk-led company rose almost 7% in premarket trading, after rocketing up over 19% in their first trading session to push the company’s market value above $2 trillion.
Looking ahead, the highlight is the Federal Reserve’s policy decision, seen as highly important as hot inflation readings spur debate about the odds of an interest rate hike this year. Traders are pricing in better than a 98% probability that the Fed leaves rates unchanged on Wednesday, per CME FedWatch data.
The NYSE and Nasdaq will both be shuttered for trading on Friday in observance of the Juneteenth holiday.
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Iran War’s ‘inflationary legacy’ key to stock rally’s longevity
From Bloomberg:
Inflation worries kept investors cautious even as bonds and stocks rallied on Monday after a US-Iran interim deal eased nerves, with market participants warning that the conflict’s economic fallout remains unresolved.
The MSCI Asia Pacific Index climbed as much as 3.2%, while Brent crude, 10-Year Treasury yields and the dollar declined. Yet, strategists at KCM Trade, Pepperstone Group Ltd. and Stifel Nicolaus said the agreement is more likely to create a short-term trading opportunity than mark the start of a longer-term rally.
A sustained drop in oil prices may ease inflation pressures and give central banks more flexibility, but key issues — including Iran’s nuclear program, sanctions relief and future operations of the Strait of Hormuz — remain unsettled, making it unclear whether crude prices will remain low enough to alter the outlook for interest rates.
“The big question is how quickly this oil relief translates into lower inflation and whether that opens the door for central banks to take an easier stance on monetary policy,” said Tim Waterer, chief market analyst at KCM Trade in Sydney. “The real test now is the inflationary legacy of this war.”
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