US Stock Market Rallies Amid Middle East Tensions, Crude Prices Recover

US Stock Futures Indicate Positive Start to Friday's Trade Amid Tensions in Middle East

US stock futures pointed to a positive start on Friday, May 8, following a volatile previous session in which all three key headline indices closed in the red. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average had scaled fresh record highs before giving up their gains and ending the session lower.

Futures tied to the S&P 500 rose 0.5%, while those linked to the Nasdaq Composite rose 0.7% and Dow Jones Industrial Average was up by 0.30%. Tensions in the Middle East, which had appeared to be moving toward a long-term peace deal, resurfaced after US and Iranian forces clashed near the Strait of Hormuz. This development has revived concerns over energy supplies and tested the durability of the rally that had lifted equities to record highs.

US President Donald Trump said on Thursday that three US Navy destroyers were attacked as they moved through the Strait of Hormuz, adding that "no damage was done to the three destroyers, but great damage was done to the Iranian attackers." Iran, however, accused the United States of breaching the ceasefire, an agreement that has been punctuated by intermittent clashes since it was announced on April 7.

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Despite the fresh clashes, Trump reportedly said the ceasefire with Iran remained in place despite the latest incidents between US and Iranian forces, reinforcing hopes that a broader agreement could still be reached. Before the latest clashes, the US had floated a proposal that would formally end the conflict, but it did not address two of Iran's core demands - suspending its nuclear program and reopening the Strait of Hormuz. Iran said on Thursday that it was still reviewing the latest American proposals to end the conflict.

Better-than-expected performance from technology majors and strong earnings from chipmakers revived hopes that AI demand would remain resilient, positioning all three key averages to end the week with healthy gains. The Nasdaq is on pace to climb 2.8% for the week, while the S&P 500 is on track for a 1.5% weekly gain, and the Dow Jones has lagged with a week-to-date rise of just 0.2%.

The dollar hovered around pre-war levels amid optimism that the US-Israel conflict with Iran was nearing an end. Investors will now look ahead to the release of April's unemployment rate and non-farm payrolls data.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Crude prices regained strength after three straight sessions of losses, amid fresh clashes, as traders grew concerned that a prolonged closure of the Strait of Hormuz could disrupt global oil and gas supplies. Brent crude, the international benchmark, rebounded $3 to an intraday high of $103 a barrel, recovering some of its recent losses. Despite the rebound, oil prices are still down more than 6% this week.

US stocks in focus today included Akamai Technologies, which gained 27% after the company said a leading U.S.-based frontier model provider has committed to $1.8 billion, while Microchip Technology rose 3% after better-than-expected performance in the March quarter. Weaker earnings drove CoreWeave stock to crash 7%.

Vested Finance said that strong earnings from major AI and semiconductor companies continue to fuel optimism that the AI spending boom is far from over. However, it pointed out that outside the technology sector, the global picture is becoming increasingly uncertain.