US Stocks Rise Up to 1.1%, Oil Prices Rebound Amid Fresh US-Iran Tensions

US Stock Futures Indicate Positive Start to Tuesday's Trade Amid Middle East Conflict Uncertainty

US stock futures pointed to a positive start to Tuesday's trade on 26 May, as investors remained hopeful of an imminent deal to end the Middle East conflict, despite fresh US strikes on Iran that pushed oil prices higher. The optimism was tempered by news of fresh US defensive air strikes against Iranian missile sites and boats, which clouded the outlook for the resumption of oil flows through the Strait of Hormuz.

Futures tied to the benchmark S&P 500 rose 0.7%, while Dow Jones Industrial Average futures gained 0.5%. Nasdaq 100 futures were also up 1.1%. Last week, all three major indices ended in the green, with the S&P 500 posting its eighth straight week of gains, and the Dow Jones rising to a fresh record high.

President Donald Trump stated that negotiations to end the three-month war with Iran are "proceeding nicely," but the optimism was heavily checked by the news of fresh US defensive air strikes against Iranian missile sites and boats. This development came a day after both nations had signalled willingness to end the conflict, which had sent crude oil prices to a one-month low in the previous session.

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Comparison of US Stock Futures

The strikes weighed down hopes of de-escalation in the Middle East, which were already uncertain due to key disagreements, including the future of Iran's nuclear programme and control over the Strait of Hormuz. Meanwhile, investors are also assessing the outlook for Federal Reserve policy as elevated oil prices continue to fuel inflation concerns.

Investors increasingly expect that the Fed may need to tighten monetary policy after the Iran conflict triggered the biggest inflation surge since 2023, prompting several officials to move away from their earlier easing bias. The US Federal Reserve's latest policy meeting showed that most officials believe a rate hike this year could still be warranted if inflation remains above the central bank's 2% target.

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

Trump, who has repeatedly pressured the Fed to cut interest rates, said on Friday that he wanted Kevin Warsh to lead the central bank independently. Trump has also been facing growing domestic political pressure to end the conflict, particularly ahead of the November midterm elections that will determine control of Congress.

Crude Oil Prices Rebound After Sharp Sell-Off

Crude oil prices rebounded, with benchmark US crude rising $3.7 to the day's high of $93.6 per barrel. Brent crude, the international benchmark, was up $3.6 at $97 per barrel after tumbling nearly 10% on Monday amid optimism over the potential reopening of the Strait of Hormuz.

Since the escalation of the conflict in late February, the Strait of Hormuz has effectively remained shut. A full reopening of the waterway would provide significant relief to major Asian economies and could push oil prices substantially lower, considering the route carries roughly one-fifth of global oil and LNG shipments.

US stocks in focus today included semiconductor shares, which were among the strongest performers before the open as enthusiasm around artificial intelligence continued to drive investor demand. Marvell Technology rose 5.7% in premarket trading, while Micron and Intel gained about 2% each. Nvidia remains in the spotlight, with CEO Jensen Huang reportedly demanding tighter compliance from supplier Super Micro Computer (SMCI) following fraud arrests in Taiwan.

Among early movers, Joyy jumped 12.3% after the Chinese social live-streaming platform posted first-quarter revenue above expectations.