Tensions in the Middle East intensified over the weekend as missile exchanges between Israel and Iran rattled global markets and sent shockwaves through investor sentiment. Despite the geopolitical uncertainty, US stock futures opened with modest gains late Sunday, signaling cautious optimism amid a tense backdrop. The Dow Jones Industrial Average futures (YM=F) advanced 0.1%, mirroring similar upticks in S&P 500 (ES=F) and Nasdaq 100 (NQ=F) futures, which rose 0.1% and 0.2% respectively. The muted rebound followed Friday’s steep sell-off, when the Dow plunged more than 700 points in one of the worst sessions in recent months. The bounce in futures suggests some appetite for risk remains, even as geopolitical tensions and inflationary pressures weigh heavily on market dynamics.
Highlights:
US stock futures rose modestly after weekend missile strikes.
Dow, S&P 500, Nasdaq 100 futures gained 0.1%–0.2%.
Friday’s 700-point Dow plunge reflected deepening risk aversion.
Sentiment remains fragile amid volatile geopolitical conditions.
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Energy Markets React Sharply as Israel-Iran Conflict Threatens Oil Supply Routes
Oil prices surged sharply during Sunday’s early trading session, reflecting growing fears of disruption to global energy supply chains following Israel’s retaliatory strikes and Iran’s provocative responses. West Texas Intermediate (CL=F) futures initially spiked over 6%, briefly topping $76 per barrel before retreating slightly to trade just under $74. Brent crude (BZ=F) mirrored this trend, reaching close to $78 at its intraday peak. Analysts warned that the sharp upward move in crude was driven by rising speculation that Iran may act to restrict access to the Strait of Hormuz—a strategic chokepoint through which nearly 20% of the world’s oil passes. This flashpoint could push crude into a sustained rally, reigniting inflation fears and placing additional pressure on global supply chains already strained by existing geopolitical headwinds and trade tariffs.
Highlights:
WTI crude spiked 6%, briefly breaching $76 per barrel.
Brent crude neared $78 amid global supply fears.
Markets fear Iran could close the Strait of Hormuz.
Energy volatility adds inflationary pressure to global outlook.
Safe-Haven Flows Drive Gold Prices Higher Amid Escalating Volatility
In tandem with oil, gold prices surged as investors sought refuge in traditional safe-haven assets amid heightened geopolitical stress. Gold futures (GC=F) rallied sharply following the weekend’s events, extending a trend of upward momentum seen over the past two weeks. The metal’s rise underscores investor unease about potential escalation and broader regional instability. With equity volatility spiking and Treasury yields displaying erratic movements, gold has once again asserted its role as a protective hedge in uncertain times. Analysts noted that if tensions continue to escalate or spill into oil infrastructure and shipping lanes, gold could breach new highs, particularly as investors rotate out of risk assets and seek security in dollar-denominated commodities.
Highlights:
Gold futures rose as investors turned to safe-haven assets.
Demand surged amid Israel-Iran military tensions.
Gold’s trajectory indicates broader risk-off sentiment.
Potential for continued gains if conflict widens.
Broader Market Trajectory Shaken as Weekly Indices Turn Negative
The recent conflict-induced volatility reversed what had been a relatively stable start to June for US equity markets. All three major indices—Dow, S&P 500, and Nasdaq Composite—closed the week in the red. The Dow (^DJI) ended down 1.3%, S&P 500 (^GSPC) lost 0.4%, and Nasdaq Composite (^IXIC) declined by 0.6%. The Friday sell-off marked a significant shift in momentum, with previously resilient sectors such as tech and industrials experiencing heavy selling. Market strategists attributed the risk-off move to uncertainty surrounding the Israel-Iran exchange, compounded by lingering concerns about US-China trade tensions, Trump-era tariff extensions, and sticky inflation. As capital flows turn defensive, sector rotation is increasingly favoring utilities, healthcare, and commodity-linked plays.
Highlights:
Major US indices closed last week in negative territory.
Dow fell 1.3%, Nasdaq and S&P posted 0.4–0.6% losses.
Tech and industrials were hit hardest in Friday’s sell-off.
Risk-off sentiment drove rotation into defensive sectors.
Federal Reserve Decision Looms Amid Energy Shock and Inflation Crosscurrents
As markets brace for fallout from the Middle East conflict, investors are now turning their focus toward the Federal Reserve’s upcoming rate decision, scheduled for Wednesday. While expectations remain strong that the Fed will hold its benchmark rate steady, recent developments—including rising oil prices—could complicate the central bank’s calculus on inflation. The resurgence in crude adds an unexpected tailwind to consumer prices, even as core inflation has been trending downward. The Fed’s preferred approach has been data-dependent, but the recent volatility could increase the stakes of this meeting. President Donald Trump has continued to pressure Fed Chair Jerome Powell to pivot toward a rate cut, citing weak manufacturing indicators and slower job growth. However, surging commodities and geopolitical risk may limit the Fed’s ability to move dovishly in the short term.
Highlights:
Fed expected to hold rates steady at Wednesday meeting.
Rising oil may complicate Fed’s inflation outlook.
Trump urges Powell to lower rates amid mixed economic data.
Market focus remains on forward guidance and inflation commentary.
Empire State Manufacturing Survey to Offer Early Clues on Economic Resilience
Investors will be closely monitoring Monday’s release of the New York Fed’s Empire State Manufacturing Survey for June, which could serve as an early gauge of economic health ahead of the Fed’s policy announcement. Recent manufacturing data has shown signs of stagnation, with new orders weakening and pricing pressures persisting. If the report underwhelms, it could reinforce fears of a softening economic base, despite strong consumer demand and a still-tight labor market. Analysts also point out that the manufacturing index tends to be highly sensitive to external shocks, including trade disruptions and energy volatility. Given the backdrop of rising geopolitical instability and commodity-driven inflation risk, a weaker-than-expected reading could stoke concerns of stagflation, further complicating the Fed’s policy path.
Highlights:
Empire State Survey due Monday; key for economic sentiment.
Manufacturing has shown signs of stagnation in recent months.
Data could shape expectations ahead of Fed’s rate decision.
Survey viewed as early signal of broader economic direction.
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