U.S. stock futures are trading cautiously this Monday, while oil prices have inched upward following unexpected U.S. airstrikes on Iranian nuclear facilities over the weekend. Global markets remain vigilant amid uncertainty about how Iran will respond and the potential consequences for worldwide oil and gas supplies. Meanwhile, President Donald Trump has hinted at the possibility of “regime change” in Tehran. In the U.S., the Senate is preparing to vote on a fiscal package endorsed by Trump, and investors are also awaiting key economic data due later in the day.
Futures Show Little Direction
As traders assess the impact of the U.S. military action against Iran, futures on major U.S. indices are showing limited movement. Early Monday, Dow futures were down slightly by 0.1%, while S&P 500 and Nasdaq futures remained nearly flat. Wall Street ended last week lower amid concerns about the intensifying Israel-Iran conflict and possible U.S. military involvement.
President Trump’s confirmation of the strikes on three Iranian nuclear sites has removed some prior uncertainty. Market participants are now focused on the broader implications for investor sentiment, inflation expectations, and potential Federal Reserve policy decisions.
Oil Prices Rise Amid Geopolitical Uncertainty
Oil markets reacted to the heightened geopolitical risks with price gains, reflecting fears of supply disruptions—especially in the strategic Strait of Hormuz. Analysts caution that a spike in crude prices could stoke inflation and delay any easing in interest rates by the Federal Reserve.
As of Monday morning, Brent crude for August delivery increased 0.8% to $76.11 per barrel, while West Texas Intermediate rose 0.9% to $74.48 per barrel, though both pared some gains from earlier highs.
Warren Patterson, ING’s Head of Commodities Strategy, highlighted that energy supply risks have intensified due to the uncertainty surrounding Iran’s next moves.
Focus Shifts to Iran’s Next Actions
Iran has yet to outline its precise response but has vowed to keep all options open in defense. Tehran has issued stern warnings about “lasting consequences” and stepped up airstrikes against Israel, following an escalation that began 11 days ago.
Iranian officials have criticized President Trump as a “gambler” and suggested the recent strikes have widened the scope of acceptable military targets. Trump, meanwhile, raised the prospect of regime change in Iran in a social media post on Sunday.
Reports from Iran indicate possible plans to block the Strait of Hormuz, a vital corridor for global oil shipments. There is also speculation about potential Iranian attacks on U.S. military bases across the Middle East.
Some market observers believe that while tensions have surged, the U.S. strikes have clarified Trump’s intentions, which could reduce some uncertainty for investors. Analysts at Vital Knowledge noted that removing this ambiguity might stabilize markets somewhat but warned that broader challenges like tariffs and fiscal policy remain headwinds.
U.S. Senate Moves Forward on Fiscal Legislation
On the domestic front, the U.S. Senate is set to vote this week on its version of a significant tax-and-spending bill backed by President Trump. The legislation aims to extend the 2017 tax cuts and increase funding for defense and border security, offset by cuts to entitlement programs such as Medicaid.
However, procedural hurdles have emerged after a Senate parliamentarian ruled that some provisions do not meet budget reconciliation rules, which would allow passage by simple majority.
Republicans intend to use budget reconciliation to bypass Democratic opposition, sending the bill back to the House before a July 4 deadline for Trump’s signature.
Investors Eye PMI and Economic Data
Market watchers are also awaiting June business activity figures from S&P Global, including manufacturing and services purchasing managers’ indices (PMIs). Forecasts indicate a slight dip in manufacturing PMI to 51.1 from 52.0, and a decline in services PMI to 52.9 from 53.7.
These reports will offer an early gauge of economic momentum ahead of other key data releases this week, including Tuesday’s consumer confidence survey and Friday’s inflation report, closely monitored by the Federal Reserve.
Consumer confidence has weakened recently amid worries over tariffs’ effects on inflation and growth. Still, inflation has remained relatively contained, and hopes for easing trade tensions have been supported by ongoing U.S.-China discussions.