U.S. stock futures point higher as crude oil tumbles over 2% following reports of an Iranian proposal to end the Middle East conflict and reopen the Strait of Hormuz.
Dow Jones, S&P 500 and Nasdaq futures are currently pointing to a higher open on Friday, with stocks likely to move to the upside after recovering from early weakness to end the previous session roughly flat.
Early buying interest is likely to be generated in reaction to a significant pullback by the price of crude oil, which had surged over the two previous sessions.
U.S. crude oil futures are tumbling by more than 2 percent on the day after spiking by 4.5 percent over the past two days.
The sharp pullback by crude oil prices comes as traders react to the latest reports about a potential deal to end the prolonged conflict between the U.S. and Iran.
New reports indicate that Iran has submitted a proposal to the U.S. to end the war and reopen the Strait of Hormuz within seven days.
The proposal was delivered to U.S. officials when the two sides met through mediators this week, the Washington Post quoted Iranian Foreign Minister Abbas Araghchi as saying on the sidelines of the UN General Assembly.
Buying interest may be somewhat subdued, however, with a continued increase in treasury yields likely to make some traders wary of making more significant moves.
Extending the surge seen over the two previous sessions, the yield has risen by 2 basis points, once again reaching its highest levels since July 2007.
After showing a significant move to the downside early in the session, stocks showed a notable recovery attempt over the course of the trading day on Thursday. The major averages climbed well off their lows of the session, with the Nasdaq and S&P 500 closing roughly flat.
The tech-heavy Nasdaq inched up 3.34 points or less than a tenth of a percent to 26,939.37, while the S&P 500 edged down 1.90 points or less than a tenth of a percent to 7,704.13.
The narrower Dow climbed well off its worst levels but still closed down 161.61 points or 0.3 percent at 51,349.98.
The rebound from the early slump was triggered in part by a Reuters report indicating U.S. and Iranian negotiators are discussing a phased deal to end the prolonged Middle East conflict.
Citing sources close to the talks, Reuters said the U.S. and Iran are exploring a phased path out of war that would involve Tehran reopening the Strait of Hormuz and Washington lifting its economic blockade of Iran.
Stocks responded positively to the report even as the price of crude oil gave back some ground but remained sharply higher on the day.
U.S. crude oil futures jumped by 2.7 percent on the day after spiking by 5 percent earlier in the session, keeping buying interest on Wall Street somewhat subdued.
Treasury yields also surged on the day, with the ten-year yield reaching its highest closing level since July 2007 amid the jump in crude oil futures and concerns about inflation and interest rates.
While commodities and bond traders seem to be growing tired of reports of a potential deal and awaiting more concrete developments, stock traders were willing to buy into the optimism once again.
The hopes for an end to the Middle East conflict come despite conflicting speeches by President Donald Trump and Iranian President Masoud Pezeshkian at the UN General Assembly.
Trump threatened to “annihilate” Iran in his remarks, while Pezeshkian condemned what he called “signs of a bullying mentality” from the U.S. and said that Iran would never surrender.
Biotechnology stocks showed a strong move to the upside over the course of the session, driving the NYSE Arca Biotechnology Index up by 1.5 percent.
Some strength also emerged among pharmaceutical stocks, as reflected by the 1 percent gain posted by the NYSE Arca Pharmaceutical Index.
On the other hand, gold stocks saw continued weakness amid a decrease by the price of the precious metal, with the NYSE Arca Gold Bugs Index falling by 1.4 percent.
Transportation stocks also ended the day notably lower amid the surge in crude oil prices, dragging the Dow Jones Transportation Average down by 1.3 percent.