U.S. stock futures maintained gains on Thursday, while Brent crude oil fell for a third consecutive day. Traders are awaiting the latest developments on a potential U.S.-Iran peace agreement, which could reopen oil shipments through the Strait of Hormuz.
S&P 500 futures rose 0.2%, as the benchmark index extended its record-setting run for a second straight session. Dow Jones Industrial Average futures advanced 0.2%, while Nasdaq futures, heavily weighted toward technology stocks, gained 0.1% premarket.
The MSCI All-Country World Index increased 0.23%, nearing an all-time high. European equities declined 0.3% as investors assessed a wave of corporate earnings reports. The UK's FTSE 100 dropped 0.7%, dragged down by Shell after the energy giant reduced its share buyback program. Centrica also fell after warning that retail earnings might land at the lower end of its guidance range.
Earlier, the MSCI Asia Pacific ex-Japan Index climbed 1.82% to a fresh record. Japan's Nikkei 225 resumed trading after a long holiday weekend, surpassing the 62,000 level for the first time.
Brent crude traded near $99 per barrel, extending a two-day slump that has totaled 12%, amid growing market confidence that a Middle East agreement is imminent. WTI crude futures for June delivery fell 2.5% to $92.79 per barrel. Brent has declined more than 10% this week.
Despite the recent pullback, Brent prices remain 40% higher than pre-conflict levels in late February, underscoring that elevated energy costs continue to pressure the global economy.
Samy Chaar, Chief Economist at Lombard Odier, noted that while Middle East uncertainties persist, "momentum is moving in a positive direction," and markets have taken notice. He stated, "As a result, oil prices have retreated from their peaks, which clearly alleviates pressure on the yield curve and bond yields. This is positive for equity valuations and may introduce some exchange rate volatility." Chaar added that a strong earnings season and a relatively stable macroeconomic backdrop have further bolstered market sentiment.
Traders are monitoring developments regarding Iran. According to a source familiar with the matter, Washington has proposed a plan to gradually reopen the strategic waterway and lift the U.S. blockade on Iranian ports. Investors await further updates, with negotiations on Iran's nuclear program expected in later phases. Iran is anticipated to respond via Pakistan in the coming days.
Growing optimism toward a conflict resolution has helped equities recover from war-related losses. This sentiment has added momentum to a rally driven by strong tech earnings and high expectations for artificial intelligence. Resuming shipments through the Strait of Hormuz would also reduce economic risks associated with the conflict.
Nick Twidale, Chief Market Strategist at ATFX Global, said markets are weighing execution risks, "both regarding whether a deal is finalized and, even if one is reached, how quickly disrupted supply flows can normalize."
An oil price surge in March rattled global markets, but fragile ceasefires and prospects for a deal have fueled a risk appetite rebound since April, further supported by robust tech earnings.
Francisco Simón, Head of Investment Strategy at Santander Asset Management, commented, "Although there is no final peace agreement yet, markets are clearly pricing in a significant step toward a solution. The key point is that this reduces the probability of the most negative scenarios, particularly those involving longer-term shocks to global growth."
Ahead of Friday's U.S. nonfarm payrolls report for April, and with over 80% of S&P 500 companies having reported earnings, some investors suggest the next leg of the equity rally will be driven by expectations for Federal Reserve rate cuts. In this context, falling oil prices may matter more than labor market conditions.
Money markets currently expect the Fed to hold rates steady through year-end. The European Central Bank is priced to potentially tighten policy as early as next month, with the Bank of England possibly following in July.
Global bond markets extended gains as inflationary pressures eased. The yield on the 10-year U.S. Treasury note fell 2 basis points to 4.33% on Thursday. Yields on eurozone and UK government bonds also declined. The 10-year UK gilt yield dropped 2.4 basis points to 4.910%, while the 10-year German bund yield decreased 3.6 basis points to 2.963%.
Roberto Scholtes, Strategy Director at Singular Bank, said, "I expect equities to enter a consolidation phase unless the yield curve shifts lower due to renewed expectations for Fed rate cuts. Bond yields remain highly correlated with oil prices; if oil declines on a peace deal, yields should also fall." However, Scholtes noted that even with a swift supply restoration, oil prices are unlikely to return to pre-conflict levels due to low inventories and persistent geopolitical risk premiums. He added, "Thus, I expect the 10-year U.S. Treasury yield to stabilize around 4.2%, which should provide limited support for equities."
The U.S. dollar index, which measures the greenback against a basket of six currencies, edged lower to 97.892 but held above a two-month low of 97.625 hit on Wednesday. The dollar is on track for its worst weekly performance in a month.
The yen remained in focus, trading near ¥156.36 per dollar on Thursday. The Japanese currency suddenly rallied from around ¥157.80 the previous day, briefly touching a 10-week high of ¥155.04. Sharp rebounds have occurred multiple times in the week since initial suspected intervention.
Recent abrupt yen surges have fueled speculation that Tokyo authorities intervened to support the long-depressed currency. Analysis of Bank of Japan accounts suggests officials may have used approximately $30 billion in fresh intervention, just days after a prior round, signaling determination to bolster the yen.
OCBC analysts noted that without "stronger policy support," intervention alone is unlikely to alter the broader trend. Such support could come from the Bank of Japan or relief from lower oil prices and U.S. yields. The bank maintains a year-end target of ¥155 per dollar.
Gold rose above $4,750 as falling oil prices improved the outlook for precious metals. New York gold futures advanced 1.4% to $4,758.00. Bitcoin retreated slightly but held above $80,000 after hitting a three-month high on hopes for a U.S.-Iran deal.
**Notable Movers:** - Shake Shack fell 17% after reporting weaker-than-expected Q1 results and an operating loss of $2.6 million. - McDonald's gained nearly 3.2% as adjusted EPS of $2.83 beat estimates of $2.74. - Whirlpool dropped 18% after cutting full-year guidance, citing a recessionary slump in the U.S. industry due to the Iran conflict and a sharp decline in consumer confidence from late February through March. - Shell declined 1.8% after reducing its quarterly share buyback from $3.5 billion to $3 billion. - Carlyle Group decreased 3.5% as Q1 after-tax distributable EPS of $0.89 missed expectations, with revenue also falling year-over-year. - Tapestry, parent of Coach, rose 3% after Q3 results exceeded Wall Street forecasts. - Arm Holdings fell 8.6% despite reporting Q4 adjusted EPS of $0.60 and revenue of $1.49 billion. - DoorDash jumped 10% after projecting total order value between $32.4 billion and $33.4 billion, above analyst estimates of $32.43 billion. - Zillow declined 5.5% as Q1 residential revenue missed expectations. - Fortinet surged 15% after raising full-year billings guidance. - IonQ dropped over 8% after reporting a Q4 adjusted EBITDA loss of $96.8 million, wider than the expected $80.4 million loss. - Snap fell 8% after issuing cautious Q2 revenue guidance and ending its partnership with AI startup Perplexity. - Fastly plunged nearly 26% after providing weaker-than-expected guidance. - Albemarle rose 7% as Q4 adjusted EPS of $2.95 far exceeded estimates of $1.19. - Akamai Technologies fell nearly 6% ahead of its earnings report after Thursday's close. The stock had risen for six consecutive sessions, hitting a 52-week high on Wednesday.
