By Purvi Agarwal and Twesha Dikshit
March 30 (Reuters) – U.S. stock index futures ticked higher on Monday after the indexes logged sharp declines in the previous session, following President Donald Trump’s comments on the U.S. and Iran talks while the Middle East conflict widened.
Yemen’s Iran-backed Houthi militia entered the war over the weekend and more U.S. troops arrived in the Middle East as President Donald Trump said he wanted to “take the oil in Iran” in a Financial Times interview.
Trump on Sunday said that the U.S. and Iran had been meeting “directly and indirectly” and Pakistan, acting as intermediary, said “meaningful talks” could be hosted in the coming days.
“The market is grappling with two major unknowns that feed directly into each other: when oil flows will resume in meaningful volumes, and at what price level oil switches from an inflation story to a recession story,” said Stefan Koopman, senior macro strategist at Rabobank.
Koopman also said seizing Iran’s Kharg Island would only choke its export capacity and push global oil prices higher.
Oil prices extended gains on Monday, after Houthis launched their first attacks on Israel, sending energy stocks higher with Exxon Mobil and Chevron up over 1.3% each in premarket trading.
Wall Street’s main indexes ended their fifth consecutive week in the red on Friday, with the blue-chip Dow confirming it was in correction territory after closing more than 10% below its record high.
The Nasdaq and the small-cap Russell 2000 have also confirmed the correction territory since the war began. The benchmark S&P 500 is a little over 1% away from the mark.
Wall Street brokerage Morgan Stanley downgraded global equities to “equal weight” from “overweight”, but said fund flows to U.S. equities and bonds had overtaken the rest of the world since the conflict began, indicating it might re-emerge as a safe haven for investors.
At 07:24 a.m. ET, Dow E-minis were up 299 points, or 0.66%, S&P 500 E-minis were up 41 points, or 0.64% and Nasdaq 100 E-minis were up 138.5 points, or 0.59%.
U.S. markets will be closed on Friday for the Good Friday holiday.
The spike in oil prices resulting from the Iran conflict has revived inflation fears, putting central banks in a tough spot with regard to interest rates.
Money market participants are not pricing in any easing from the Federal Reserve this year, compared with two cuts before the war began, as per CME Group’s FedWatch Tool.
Investors will closely monitor comments from Fed Chair Jerome Powell and New York Fed President John Williams, scheduled to speak later in the day.
A host of labor market data, including the nonfarm payrolls figures for March, is scheduled for release this week and expected to provide more insight into the health of the economy.
Among other movers, Sysco’s shares dropped 4.7% before the bell after the Wall Street Journal reported the food distributor was nearing a $29 billion deal to acquire catering supplier Restaurant Depot.
Shares of aluminum producers climbed as prices of the metal were trading around four-year peaks. Alcoa and Century Aluminum gained 8.2% and 9.8%, respectively.
(Reporting by Purvi Agarwal and Twesha Dikshit in Bengaluru; Editing by Devika Syamnath and Shinjini Ganguli)
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