Stocks pared earlier gains and oil prices rebounded after US strikes on Iranian missile launch sites and vessels reignited concerns about instability in the Middle East.
S&P 500 futures still rose 0.6%, though optimism faded compared with Monday’s rally, while Asian equities advanced only modestly. Brent crude climbed 2.5% to around $98.50 a barrel after plunging more than 7% in the previous session, as fears resurfaced over disruptions to the Strait of Hormuz. The dollar strengthened against major currencies, Treasuries rallied as trading resumed after holidays, and gold slipped 1%. Investors remain cautious because elevated oil prices could keep inflation high and reinforce expectations that the Federal Reserve may maintain higher interest rates for longer.
Markets continue to swing on hopes for a diplomatic agreement between the US and Iran. President Trump said negotiations were “proceeding nicely,” while Pakistan’s military chief reportedly told China that a deal was close. Secretary of State Marco Rubio, however, warned talks could still take several days, and key disputes — particularly over Iran’s nuclear program and the release of frozen assets — remain unresolved. Analysts said the latest US strikes are being viewed as defensive rather than a major escalation, but investors are scaling back earlier optimism as uncertainty persists.
Separately, geopolitical tensions also increased after Russia warned the US to evacuate personnel from Kyiv ahead of intensified strikes, while Hong Kong markets fluctuated amid China’s crackdown on illicit overseas stock trading to curb capital outflows.
