Futures tied to the major U.S. equity indices moved higher, as investors assessed the outlook for the ongoing conflict in the Middle East. Oil prices remained above $100 per barrel amid reports of U.S. troop deployments to the region and speculation that President Donald Trump is weighing a possible operation to extract uranium from Iran. At the same time, Trump said negotiations with Tehran were progressing and hinted that an agreement to end hostilities could be near.
Futures rise
U.S. stock futures edged up on Monday as the conflict with Iran moved into its second month, leaving markets uncertain about how the situation might evolve.
By 03:30 ET, Dow futures were up 93 points, or 0.2%. S&P 500 futures gained 18 points, or 0.3%, while Nasdaq 100 futures advanced 62 points, also up 0.3%.
Wall Street’s major indices had declined in the previous session even after President Trump extended the deadline for Iran to reopen the Strait of Hormuz until April 6, warning that failure to comply could lead to U.S. strikes on energy facilities.
“[M]arkets remain very much on edge about the Middle East, and the consensus view is still that the conflict is set to escalate,” analysts at Vital Knowledge wrote in a note to clients.
Brent climbs
With tensions continuing in the Middle East, the Wall Street Journal reported that President Trump is considering a complicated and potentially risky military plan aimed at removing nearly 1,000 pounds of uranium from Iran.
Meanwhile, members of the U.S. 31st Marine Expeditionary Unit have reportedly arrived in the region, a move seen as expanding the military options available to Trump as he evaluates the next phase of the conflict. According to the Washington Post, the Pentagon is preparing for the possibility of several weeks of ground operations inside Iran.
Tehran has warned it would destroy any American forces attempting to launch a ground invasion.
Over the weekend, at least 12 U.S. soldiers were injured in Iranian attacks on an air base in Saudi Arabia. Iran-backed Houthi militants in Yemen also entered the conflict for the first time, launching attacks on Israel and intensifying concerns over possible disruptions to global energy supply routes.
Vital Knowledge analysts cautioned that if the Houthis were to target the Bab al-Mandab Strait, the global shipping crisis already triggered by the effective closure of the Strait of Hormuz off Iran’s southern coast could be “dramatically amplif[ied].” The Bab al-Mandab Strait is a critical shipping corridor linking the Red Sea with the Gulf of Aden and the Indian Ocean.
By 03:45 ET, Brent crude futures had surged 3.3% to $108.77 per barrel.
Trump says Iran negotiations going “well”
Trump indicated that discussions with Iran may be underway and suggested that a diplomatic agreement could be within reach.
Speaking to reporters aboard Air Force One, the president said talks were going “extremely well” and claimed a deal with Tehran remained possible. He also referred to “regime change” in Iran following U.S. strikes that killed several senior Iranian officials in recent weeks.
“I think we’ll make a deal with them, but it’s possible we won’t,” Trump said. In response to a reporter’s question, he added: “I do see a deal with Iran, could be soon,” though he did not provide a timeline.
Iranian officials have largely denied that direct negotiations with Washington have taken place since the conflict began, insisting that hostilities must cease before any talks can begin.
As has often been the case throughout the war, Trump’s remarks were accompanied by mixed signals. Alongside reports of a potential U.S. uranium extraction operation, the president told the Financial Times that he was interested in taking control of Iran’s oil resources and could even seize Kharg Island, one of Tehran’s main export hubs.
“Maybe we take Kharg Island, maybe we don’t. We have a lot of options,” Trump told the FT.
Gold ticks up
Gold prices moved slightly higher on Monday following a volatile week of trading. Spot gold rose 0.8% to $4,527.01 per ounce by 03:55 ET, while gold futures gained 0.7% to $4,555.05 per ounce. Last week, spot gold briefly fell to around $4,000 before rebounding toward $4,500 by Friday.
Analysts at OCBC said the rebound from last week’s lows appeared to be largely technical. Gold had previously dropped as much as 20% from levels seen before the Iran conflict erupted in late February.
They noted that downward momentum seemed to be easing somewhat, with the metal’s relative strength index climbing out of oversold territory.
However, the analysts cautioned that it remains uncertain whether the recovery can continue, pointing to resistance levels for spot gold around $4,624, $4,670 and $4,850 per ounce.
U.S. data this week
Investors are also preparing for a series of economic releases this week that may provide clues about how the conflict with Iran is affecting the broader U.S. economy.
A new reading on U.S. manufacturing activity for March from the Institute for Supply Management is scheduled for Wednesday. Economists expect the index to decline slightly while remaining in expansion territory.
Attention will then turn to Friday’s U.S. employment report. Economists forecast that the economy added around 56,000 jobs in March, recovering from a loss of 92,000 in February. The unemployment rate is expected to remain unchanged at 4.4%.
The nonfarm payrolls report will likely receive particularly close attention, as it could influence how the Federal Reserve approaches monetary policy in the coming months.
“In terms of the U.S. data this week, the focus will be on the labor market,” analysts at ING said in a note. “Friday’s NFP release, […] should leave the market minded to price [Fed] tightening this year in response to the energy shock. Any surprise weakness could hit the dollar.”