US Stock Market Stabilizes Amid Trump Rejection of Iran Proposal, Crude Oil Prices Spike

US Stock Futures Indicate Cautious Start to Monday's Trade

US stock futures signaled a muted start to Monday's trade, as investors exercised caution while closely monitoring the latest developments in the Middle East. A rebound in crude oil prices also contributed to a subdued sentiment. Futures tied to the S&P 500 slipped 0.1% early Monday, while Dow Jones Industrial Average futures declined 0.2%. Nasdaq Composite futures remained largely flat.

Recent Market Performance

US equities are coming off a strong run, with the S&P 500 and Nasdaq having posted their sixth consecutive weekly gain. Both indices reached fresh record highs on Friday, following a stronger-than-expected jobs report. Last week, the S&P 500 and Nasdaq Composite advanced 2.33% and 4.51%, respectively.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Middle East Tensions

Hopes of a near-term peace deal between the US and Iran faded after US President Donald Trump rejected Iran's response to a US peace proposal. This move raised concerns that the 10-week-old conflict could drag on and continue to disrupt shipping through the Strait of Hormuz. Iran on Sunday reportedly released a proposal to end the war on all fronts, which included a demand for compensation for war damages and emphasized Iranian sovereignty over the Strait of Hormuz.

Earnings and Economic Data

Major US companies scheduled to report results this week include Cisco and Applied Materials. Heavyweights Nvidia and Walmart are due to report results later this month. Investors are also awaiting April US inflation data, due on Tuesday, for further signs of how rising oil prices are feeding into broader price pressures across the economy.

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

Labour Market Performance

Last week's data showed that US employment increased more than expected in April, while the unemployment rate remained steady at 4.3%. This points to continued resilience in the labour market. The stronger labour market helped fuel the recent rally but also complicated expectations for aggressive interest rate cuts by the Federal Reserve.

Crude Oil Prices

Brent crude futures surged $4.6 to $106.90 per barrel after rallying 3.3% in the previous session. WTI crude futures crossed the $100-per-barrel mark, touching an intraday high of $100.37. The rebound in oil prices has revived concerns that escalating tensions in the Middle East could once again spill over into inflation, supply chains, and broader market volatility.

The correlation between oil prices and stock markets has also turned positive over the past two weeks, meaning the two asset classes are now more likely to move in tandem rather than in opposite directions — a reversal from the trend seen through most of the conflict so far. Iran has effectively shut the Strait of Hormuz, disrupting a key corridor that typically handles nearly one-fifth of the world's oil and gas shipments.