U.S. stock futures are indicating a weaker start on Thursday, suggesting markets may retreat after the strong rally seen in the previous session.
Investors could look to lock in profits from Wednesday’s gains amid growing doubts about the stability of the Middle East ceasefire. Iran has accused both the United States and Israel of breaching the agreement.
Iran’s deputy foreign minister, Saeed Khatibzadeh, told the BBC that Tehran has once again shut the Strait of Hormuz.
Khatibzadeh said Israeli strikes on Lebanon earlier in the day represented an “intentional grave violation” of the ceasefire deal.
Oil markets reacted quickly to the developments. U.S. crude futures rebounded sharply, jumping more than 5% after plunging over 16% on Wednesday.
“There is an air of renewed nervousness pervading financial markets after the euphoria which was initially prompted by the US-Iran ceasefire,” said Dan Coatsworth, head of markets at AJ Bell.
“This agreement already seems to be fraying at the edges – with continued strikes by Israel on Lebanon a key sticking point,” he added. “With talks on a lasting deal yet to begin it’s understandable that investors are taking a circumspect view.”
Late Wednesday, President Donald Trump said in a post on Truth Social that U.S. forces would remain stationed in the region until a “real agreement” with Iran is reached and “fully complied with.”
Despite those concerns, stocks surged during Wednesday’s session and maintained strong momentum throughout the day, with major indexes closing at their highest levels in about a month.
The gains came after a mixed finish on Tuesday. The Dow Jones Industrial Average jumped 1,325.46 points, or 2.9%, to 47,909.92. The Nasdaq Composite rose 617.15 points, or 2.8%, to 22,635.00, while the S&P 500 advanced 165.96 points, or 2.5%, to 6,782.81.
The rally was initially sparked by reports that the United States, Israel, and Iran had agreed to a two-week ceasefire.
In a Truth Social post Tuesday evening, President Trump said he would pause bombing operations against Iran for two weeks provided Tehran agreed to reopen the Strait of Hormuz completely and immediately, ensuring safe passage through the strategic waterway.
Trump said Washington had received a 10-point proposal from Iran that he believed was a “workable basis on which to negotiate,” adding that the temporary ceasefire would provide time to finalize the agreement.
Iran’s Foreign Minister Abbas Araghchi later issued a statement indicating the Strait of Hormuz would reopen for two weeks if attacks on Iran stopped.
The ceasefire announcement triggered a sharp drop in oil prices, with U.S. crude futures falling more than 15% and slipping well below $100 per barrel.
“The positive market reaction is understandable as a two-week ceasefire raises hope for a complete end to the conflict,” Coatsworth said.
“The ceasefire gives the world a moment to breathe and take stock of events,” he added. “Unfortunately, there is no guarantee that everything will return to normal.”
Airline stocks were among the biggest gainers during the rally, with the NYSE Arca Airline Index climbing 7.3% to its highest closing level in a month.
Semiconductor shares also posted strong gains, pushing the Philadelphia Semiconductor Index up 6.3%.
Networking stocks moved sharply higher as well, lifting the NYSE Arca Networking Index by 5.3%.
Housing, computer hardware, and financial stocks also advanced significantly, while oil producers and natural gas companies moved lower, diverging from the broader market trend.