U.S. stock-index futures were modestly higher on Monday as markets tried to price the economic and market implications of a Middle East conflict that has continued into a second month. Investors tracked reports of American military repositioning in the region and statements from President Donald Trump suggesting direct engagement with Iran could be yielding progress, even as questions persist about the conflict's next phase.
By 03:30 ET (08:30 GMT), the Dow futures contract had gained 93 points, or 0.2%, S&P 500 futures were up 18 points, or 0.3%, and Nasdaq 100 futures had added 62 points, or 0.3%. Those moves followed a session in which the main Wall Street averages fell, despite the president extending a deadline until April 6 for Iran to reopen the Strait of Hormuz or face U.S. strikes on energy infrastructure.
Analysts at Vital Knowledge told clients that markets remain anxious about the Middle East, and that the prevailing view is that the conflict is likely to escalate further. That backdrop has kept traders attentive to developments that could affect energy supply routes and shipping chokepoints, and by extension, global commodity prices and inflation expectations.
Oil and shipping choke points in focus
Brent crude futures climbed, reflecting heightened concerns over potential disruptions to oil flows. By 03:45 ET, Brent had risen 3.3% to $108.77 a barrel. The move came as multiple reports said President Trump is considering a complex operation to remove nearly 1,000 pounds of uranium from Iran, and as U.S. forces were reported to be augmenting their presence in the region.
Sources indicated that troops from the U.S. 31st Marine Expeditionary Unit have arrived in the Middle East, a deployment described as broadening Washington's operational options. Concurrently, one report said Pentagon planners were preparing for weeks of ground operations in Iran. Tehran has warned it would destroy any U.S. forces that try to conduct a ground incursion.
At least 12 U.S. service members were wounded in Iranian attacks on a Saudi Arabian air base over the weekend. In addition, Iran-aligned Houthi rebels in Yemen launched attacks at Israel, marking an expansion of hostilities that amplifies concerns about the security of key maritime passages. Vital Knowledge analysts warned that if the Houthis were to directly target the Bab al-Mandab Strait, the already serious strain on global shipping caused by the effective closure of the Strait of Hormuz would be dramatically amplified. The Bab al-Mandab Strait links the Red Sea to the Gulf of Aden and the Indian Ocean and is a critical artery for vessel traffic.
Political signals: negotiations and military options
President Trump told reporters aboard Air Force One that direct talks with Iran were proceeding "extremely well" and that a deal might be achievable. He added, "I think we'll make a deal with them, but it's possible we won't," and when pressed said, "I do see a deal with Iran, could be soon." He did not attach a timetable to that assessment.
At the same time, Trump discussed other measures in public remarks to the Financial Times, saying he wants to take Iran's oil and that seizing Kharg Island, a major Iranian export hub, was among the options under consideration. "Maybe we take Kharg Island, maybe we don't. We have a lot of options," he told the FT. The possibility of such moves has been reported alongside coverage of potential extraction operations and the increased military footprint.
Iran, for its part, has largely denied that direct negotiations with Washington have taken place since the war began, and has insisted that hostilities must cease before any talks can be held.
Gold hedges against volatility
Precious metals posted gains as investors sought havens amid the heightened geopolitical risk. Spot gold rose 0.8% to $4,527.01 an ounce by 03:55 ET, while gold futures were up 0.7% at $4,555.05 an ounce. Spot gold had fallen as low as $4,000 an ounce last week before recovering to near $4,500 an ounce by Friday.
OCBC analysts characterized gold's rebound from the prior week's lows as largely technical, noting that the metal had tumbled as much as 20% from levels seen before the outbreak of the Iran conflict in late February. The analysts said bearish momentum had shown some signs of easing, with gold's relative strength index recovering from oversold territory. They cautioned, however, that it was unclear whether the rally could be sustained, pointing to resistance levels for spot gold at $4,624, $4,670, and $4,850 an ounce.
Economic calendar: manufacturing and payrolls in focus
Investors will also be watching a slate of U.S. economic releases this week for early signals of how the conflict and higher energy prices might be filtering through to growth and inflation. On Wednesday, the Institute for Supply Management's gauge of manufacturing activity for March is due. Wall Street economists generally expect the index to retreat but remain in expansionary territory.
Friday's U.S. jobs report is likely to garner particular attention. Economists are forecasting a gain of 56,000 jobs in March, a rebound from a loss of 92,000 in February, with the unemployment rate expected to hold at 4.4%. The nonfarm payrolls figures are expected to be scrutinized for any implications they might have for Federal Reserve policy amid an energy-driven shock to the economy.
ING analysts remarked that the labor market report was the week's primary data focus, noting that Friday's nonfarm payroll release should influence market expectations for possible Federal Reserve tightening this year in response to the energy shock. They added that any surprising weakness in the data could exert downward pressure on the dollar.
Market implications and sectors to watch
The combination of military developments, potential direct negotiations, and the risk of disruption to major shipping lanes has left energy markets and related sectors particularly sensitive. Oil and shipping are central to the immediate market moves described above, while investors are monitoring safe-haven assets such as gold. Financial markets overall remain reactive to any signals that might indicate either a move toward de-escalation or a further widening of the conflict.
With manufacturing indicators and the labor market report due this week, traders will be balancing geopolitical risk premiums against incoming economic data that could shape expectations for monetary policy and growth.