US stock futures traded sharply higher on Monday, 27 July, as investor risk appetite improved after crude oil prices retreated from recent highs amid easing tensions between the US and Iran following weeks of escalating hostilities.
Dow Jones Industrial Average futures climbed 550 points, or 1.1%, while S&P 500 futures gained 1%. Nasdaq-100 futures outperformed, rising 1.7%. The rebound comes after all three major indices ended last week with steep losses, extending their decline for a second consecutive week.
After nearly two weeks of military strikes, the US has reportedly paused its attacks since late Friday without providing an explanation, raising questions over President Donald Trump’s next move. Iran’s military also said on Sunday that Tehran had suspended its military response.
The development also revived expectations of renewed negotiations on an interim ceasefire agreement, which had largely been derailed by the recent escalation in hostilities. On Friday, US Central Command carried out its 13th consecutive night of strikes on Iran, targeting military infrastructure and maritime capabilities.
The 60-day period that began when the interim agreement was signed by both countries in mid-June is now well into its second half.
However, major issues that were expected to be negotiated, including Iran’s nuclear programme, the central source of tensions, remain unresolved as mediators continue efforts to keep both sides engaged.
Meanwhile, investor focus is shifting to quarterly earnings from megacap technology companies after the recent sell-off in AI-related stocks reignited concerns over whether the billions of dollars being invested in artificial intelligence infrastructure will generate adequate returns.
The recent correction highlighted a shift in investor sentiment towards AI and the Magnificent Seven technology companies, setting the stage for a crucial week of earnings. Microsoft and Meta Platforms are scheduled to report on Wednesday, followed by Apple and Amazon on Thursday.
Investors will also closely monitor the US Federal Reserve’s two-day policy meeting on 28-29 July, along with Chair Kevin Warsh’s commentary. The Street broadly expects the central bank to keep interest rates unchanged.
Crude oil tumbles as ceasefire hopes improve market sentiment
Amid the pause in military strikes in the Middle East, crude oil prices began the week on a sharply lower note. International benchmark Brent crude futures fell as much as 12.5% to an intraday low of $84.65 a barrel, their lowest level since 17 July.
US benchmark WTI crude futures also declined 7% to $82.17 a barrel. The pause in hostilities raised hopes that shipping through the Persian Gulf and the Strait of Hormuz would gradually normalise after recent disruptions caused by the conflict.
On Friday, reports emerged that Pakistan, with support from China, was attempting to revive negotiations between the US and Iran, raising hopes for a diplomatic solution to ease tensions.
Despite Monday’s sharp decline, oil prices remain significantly higher for the month. Brent and WTI have surged nearly 20% in July as supply concerns intensified after disruptions spread from the Strait of Hormuz to the Red Sea, an increasingly important alternative route for Saudi Arabian crude exports that carries millions of barrels of oil each day.
(With inputs from agencies)
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