Pre-Market Update: Dow, S&P 500 and Nasdaq Futures Rise as US-Iran Peace Talks Progress

TLDR

• Dow, S&P 500, and Nasdaq futures all rose Tuesday morning on hopes of a US-Iran peace deal
• Trump said talks with Tehran were “proceeding nicely” but warned military action remained an option
• The US sank two Iranian Guard ships in the Strait of Hormuz in what it called defensive strikes
• Oil prices dropped sharply, with West Texas Intermediate falling nearly 4% to $92.84 a barrel
• Bitcoin slipped 1.1% to $76,679 as broader risk sentiment remained cautious

US stock futures climbed Tuesday morning as investors focused on the possibility of a peace deal between the US and Iran, even after fresh military clashes in the Strait of Hormuz.

Futures tied to the Dow Jones Industrial Average rose 233 points, or 0.5%. S&P 500 futures gained 0.6%, and Nasdaq 100 futures added 0.9%. The stock market was closed Monday for Memorial Day.

President Trump posted on Truth Social Monday that talks with Tehran were “proceeding nicely.” He also said the US was prepared to order more strikes if talks fell apart.

Despite the cautious tone, investors appeared largely unmoved by the latest military exchange. The US Navy sank two Islamic Revolutionary Guard Corps ships that were attempting to lay mines in the Strait of Hormuz. Military officials called the action defensive.

Iran’s Revolutionary Guard said it reserved the right to retaliate against what it described as cease-fire violations.

Oil Prices Drop on Peace Deal Hopes

Oil markets responded quickly to the peace talk optimism. West Texas Intermediate crude futures dropped around 4% to $92.84 a barrel. Brent crude also fell over 4%.

US oil dropped 8.4% last week, its steepest weekly decline since mid-April. Lower oil prices have been a key driver of the recent stock market rally.

The 10-year Treasury yield fell 6 basis points to 4.51%. The dollar slipped 0.2% against a basket of currencies.

The three major indexes posted gains last week, with the S&P 500 recording its longest weekly winning streak since December 2023.

Analysts Warn Summer Selloff Is Possible

Not everyone is optimistic. Dennis Follmer, chief investment officer at Montis Financial, said the situation in the Middle East had become “a long stalemate with nearly all the ships still stranded in the Persian Gulf.”

Follmer added that the S&P 500 was still riding momentum from a strong first-quarter earnings season, but warned that “the likelihood of a summer selloff is high” with earnings season now over.

Traders are also adjusting their expectations for Federal Reserve policy. The probability of a Fed rate hike in July has risen to 8.5%, up from just 0.9% one month ago, according to CME Group’s FedWatch tool.

Bitcoin fell 1.1% to $76,679 over the past 24 hours. The cryptocurrency often tracks broader market risk sentiment.

Markets appeared to take the latest US-Iran exchange in stride, with futures holding gains even after news of the Strait of Hormuz clashes broke. Whether that calm holds will likely depend on how peace talks develop in the coming days.

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