US Stock Futures Surge 1% on Report Trump Weighing Iran War Exit Without Hormuz Reopening
By Martin Lam
Market Overview
US equity index futures experienced a significant increase of 1% during evening trading on Monday, reversing earlier session losses. This surge followed a report indicating that President Donald Trump is contemplating an end to the Iran conflict, even if the Strait of Hormuz remains closed. This development has alleviated concerns regarding a prolonged supply shock in the oil market.
Futures Performance
As of 21:43 ET, the S&P 500 futures rose by 0.9% to 6,446.75, the Nasdaq 100 futures gained 1% to 23,364.0, and the Dow Jones futures advanced 1% to 45,902.0. This rally occurred after cash indexes closed mixed, with the S&P 500 down 0.4% at 6,343.72, the Nasdaq Composite falling 0.7% to 20,794.64, and the Dow Jones Industrial Average edging up 0.1% to 45,216.14.
Commodity Market Reactions
Brent crude oil prices initially rose to around $82 per barrel but later settled at approximately $78.50, while WTI crude fell by 1.5% to $74.20, reflecting hopes for de-escalation. Gold prices also saw a decline of 0.8% to $4,475 an ounce, and the Dollar Index slipped 0.2% to 99.69, indicating improved risk appetite among investors. The 10-year Treasury yield decreased by 3 basis points to 4.32%.
Details of Trump's Consideration
According to the Wall Street Journal, Trump has expressed to his aides a willingness to wind down hostilities once US forces have significantly weakened Iran’s navy and missile capabilities, even if Tehran does not immediately reopen the Strait of Hormuz. The administration believes that a military operation aimed at forcing the reopening of the strait could extend the conflict beyond the initially planned four-to-six week timeline. Consequently, the focus is shifting towards achieving core military objectives and then pursuing diplomatic efforts with Tehran.
Implications for Global Oil Supply
The US is expected to encourage European and Gulf allies to take the lead in reopening the Strait of Hormuz, which is crucial as it handles about 20% of global oil consumption, while the US aims to conclude direct combat operations. Iran has consistently demanded a halt to hostilities before engaging in direct negotiations, suggesting that a US withdrawal could lead to broader de-escalation in the region.
Market Sentiment and Stock Performance
Market sentiment has shifted, with analysts noting that the likelihood of a prolonged disruption in the Strait of Hormuz is now perceived as limited. This has allowed equities to recover while oil prices have decreased from their elevated levels. Technology stocks, which had previously weighed on indexes due to concerns over AI valuations and weaker chip demand, found support in the futures session as geopolitical risks diminished. Conversely, energy and defense stocks, which had performed well during the escalation phase, saw a decline as traders shifted their focus to growth-oriented sectors.