U.S. stock index futures are signaling a sharply higher open on Monday, suggesting equities may rebound strongly after the recent sell-off that has weighed on markets in the past few sessions.
Investors may be inclined to buy stocks at discounted levels following the downturn that pushed both the Nasdaq and the S&P 500 to their lowest closing levels in more than six months.
The improved sentiment appears linked to U.S. President Donald Trump stepping back from earlier threats to “obliterate” Iran’s power plants if the country failed to fully reopen the Strait of Hormuz.
In a post on Truth Social, Trump said the United States and Iran had held “very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East.”
He added that he had instructed the War Department to delay any planned military strikes against Iranian power plants and energy infrastructure for five days.
Previously, the president had warned that the U.S. would “obliterate” Iran’s power plants if Tehran did not reopen the Strait of Hormuz within 48 hours and had stated he was not interested in negotiating with Iran.
Iran responded by warning that it would target energy and water infrastructure across the Gulf if Washington carried out the threatened strikes.
Although oil prices dropped sharply following Trump’s latest comments, Iran’s official Fars news agency later reported that Tehran was not engaged in direct talks with the United States, either directly or through intermediaries.
Stocks extended recent losses on Friday
Stocks fell sharply during Friday’s trading session, extending declines seen over the previous two days. The latest drop pushed the Nasdaq and the S&P 500 to their lowest closing levels in more than six months.
Both the Dow and the Nasdaq briefly entered correction territory, defined as a 10% decline from recent highs, before recovering some ground toward the end of the session.
The technology-heavy Nasdaq led the downturn, falling 443.08 points, or 2.0%, to 21,647.61. The S&P 500 dropped 100.01 points, or 1.5%, to 6,506.48, while the Dow Jones Industrial Average declined 443.96 points, or 1.0%, to 45,577.47.
The declines erased earlier gains from the start of the week. For the full week, the S&P 500 fell 1.9%, while both the Dow and the Nasdaq dropped 2.1%.
Oil volatility remains key driver
The selling pressure on Wall Street came as crude oil prices continued to swing sharply, with energy markets playing a major role in recent trading activity.
Crude oil for May delivery has experienced significant volatility during the session but was recently climbing nearly 3% in electronic trading.
Prices initially surged after reports of fresh attacks on energy infrastructure in the Middle East. However, gains briefly faded after reports suggested the United States was considering easing sanctions on certain Iranian oil exports to boost supply and help lower prices.
The rally resumed in part following comments from Trump during an interview with MS Now’s Stephanie Ruhle, in which he suggested the United States would continue attacking Iran until it could “never rebuild.”
Trump later told reporters he was not interested in a ceasefire with Iran, saying, “You don’t do a ceasefire when you’re literally obliterating the other side.”
Although oil prices have been highly volatile in recent sessions, they remain significantly higher than when the conflict began, raising concerns about the outlook for inflation and interest rates.
According to CME Group’s FedWatch Tool, markets currently expect the Federal Reserve to keep interest rates unchanged this year, with some probability that rates could even rise by year-end.
Technology and rate-sensitive sectors lead losses
Computer hardware stocks were among the worst performers on Friday. The NYSE Arca Computer Hardware Index plunged 6.0% after closing at a record high in the previous session.
Super Micro Computer (NASDAQ:SMCI) led the sector lower, plunging 33.3% after U.S. prosecutors charged several employees of the technology firm with smuggling Nvidia (NASDAQ:NVDA) chips to China.
Networking stocks also saw heavy selling, with the NYSE Arca Networking Index dropping 4.6%. The index had also reached a record closing high the day before.
Interest rate-sensitive utility stocks weakened as well, pushing the Dow Jones Utility Average down 3.7% to its lowest closing level in more than a month.
Gold, commercial real estate and airline stocks also recorded significant declines amid broad-based selling pressure across Wall Street.