After a three-week-long rally that's brought the S&P 500 to new record highs, investors are again bracing for uncertainty following a whirlwind of weekend developments concerning the war with Iran.
Dow Jones Industrial Average futures dropped around 445 points, or 0.9%, late Sunday. S&P 500 futures were down 0.8% and Nasdaq-100 futures were down around 0.6%. Meanwhile, West Texas Intermediate crude oil futures surged 7%, to almost $90 a barrel. Bitcoin fell and was last trading around $74,000, erasing Friday's rally that saw the crypto hit a two-month high.
Hopes had been raised last week that the war may soon end, and that the crucial Strait of Hormuz was reopening to shipping traffic. But Iran on Saturday said the strait remained closed, and reportedly fired on two Indian-flagged ships that were forced to turn around. In a social-media post Sunday, President Donald Trump called that "a total violation of our ceasefire agreement."
Iranian officials said Sunday that the strait will remain closed as long as the U.S. continues its blockade of Iranian ports, according to the Associated Press.
Trump said Sunday that a U.S. delegation will return to Islamabad, Pakistan, on Monday for talks on extending the two-week-long cease-fire, which is set to expire this week. Iran, however, had not yet confirmed it would attend the talks.
But Trump also renewed threats to bomb Iran's civilian infrastructure if the country's new government doesn't agree to a deal.
"I hope they take it because, if they don't, the United States is going to knock out every single Power Plant, and every single Bridge, in Iran. NO MORE MR. NICE GUY!" Trump said in a Truth Social post Sunday morning.
Trump also posted that the U.S. seized an Iranian-flagged cargo ship in the Gulf of Oman that had tried to run the blockade.
The renewed bluster could derail the market's recovery. Stocks had roared back from March losses triggered by the Iran war.
"That is the problem with trading a tape that is being written in real time by geopolitics rather than grounded in anything stable," Stephen Innes, managing partner at SPI Asset Management, said in a weekend note. "What looked like a clean glide path into the weekend could instead fracture into yet another Monday-open negative feedback loop, where price chases headlines and then headlines chase price. "
Last Wednesday, the S&P 500 closed above the 7,000 level for the first time ever, and notched two more record closes Thursday and Friday. Meanwhile, the tech-heavy Nasdaq posted its 13th straight session of gains, its longest winning streak since 1992. The S&P 500 ended the week up 4.5% while the Nasdaq jumped 6.8%. The Dow Jones Industrial Average saw its best week sine June, rising 3.2%.
Crude oil prices ended Friday at five-week lows as tensions had relaxed. West Texas Intermediate crude for May delivery fell 11.5% on Friday, down more than $20 a barrel from earlier last week. Brent crude for June delivery (BRNM26), the global benchmark, closed down 9% on Friday.
Aside from geopolitical developments, investors will also be keeping a close eye on earnings this week. Tesla, Intel, IBM, Boeing and United Airlines are among the top companies scheduled to report first-quarter results.
And Tuesday, the Senate Banking Committee will hold its first hearing weighing the confirmation of Kevin Warsh - who is expected to support interest-rate cuts - as Trump's pick to lead the Federal Reserve.
In a note Sunday, Yardeni Research called Warsh's case for lower rates "fundamentally flawed" and warned that aggressive cuts would risk "speculative bubbles and a financial crisis."
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