Overview
U.S. stock futures were trading higher on Tuesday as markets reopened after a holiday, with investors weighing a fresh round of military activity between the United States and Iran. The push-and-pull of strikes and counterstrikes has reduced optimism that a swift diplomatic resolution is imminent, while energy prices climbed and safe-haven flows left bullion under pressure.
Futures edge up at open
As trading resumed following the Memorial Day holiday, futures tied to the major U.S. indices were in positive territory. At 03:42 ET (07:42 GMT), the Dow futures contract showed a rise of 281 points, or 0.6%, S&P 500 futures were up by 41 points, or 0.6%, and Nasdaq 100 futures had gained 220 points, or 0.8%.
Market commentary noted a prevailing bias toward pricing eventual de-escalation in the Middle East, even as occasional precision strikes from the U.S. continue to occur. The main Wall Street averages had been closed on Monday for Memorial Day, and all major U.S. indices had advanced in their last session on Friday, with the Dow Jones Industrial Average recording a fresh closing high on that day. Investors have been focusing on fast-moving developments in the Middle East, a strong slate of corporate earnings, and sustained enthusiasm for artificial intelligence-related demand.
New U.S. strikes, Iranian response
U.S. forces conducted what they described as defensive strikes in southern Iran, sinking two vessels belonging to the Islamic Revolutionary Guard Corps that were attempting to lay mines in the Strait of Hormuz. Tehran retaliated by firing missiles at U.S. aircraft. Subsequent U.S. strikes reportedly targeted missile launchers near Bandar Abbas, according to reporting that cited a U.S. official.
Those actions dampened recent hopes that Washington and Tehran might be close to a comprehensive agreement to end a conflict that has been ongoing for nearly three months. U.S. Secretary of State Marco Rubio indicated that talks on a deal could take a few days and suggested the Strait of Hormuz would eventually be reopened "one way or the other." Over the weekend, reports emerged that both sides had agreed in principle to a deal, and President Donald Trump said negotiations were proceeding "nicely," while warning that fighting could resume and escalate if a settlement was not reached.
Oil climbs on renewed supply worries
Energy markets moved higher as traders reacted to the new exchange of strikes. Brent crude, the global oil benchmark, was last reported up 2.4% at $98.39 a barrel, reversing some of the declines recorded on Monday when reports of negotiating progress briefly eased price pressures. Despite the recent pullback and intraday swings, Brent remains substantially above pre-war levels, which were around $70 a barrel.
The situation in the Strait of Hormuz remains central to market attention. The narrow passage off Iran's southern coast carries approximately one-fifth of the world's seaborne oil flows and has been largely closed to tanker traffic since a joint assault by U.S. and Israeli forces in late February. That effective closure and the prospect of further disruptions have heightened concerns about an energy-driven inflationary wave and its implications for broader prices.
Dollar support weighs on gold
Against the backdrop of renewed military activity and higher oil, the U.S. dollar held a firm footing. Investors seeking perceived safety amid geopolitical risk have been moving into the greenback, with the view that the U.S. economy - as a major energy exporter - could be relatively insulated from a rise in oil prices. The dollar index, which measures the currency against a basket of six peers, has climbed 1.3% over the past three months. On Tuesday it last inched down by 0.2%.
Gold has been pressured in this environment. A stronger dollar makes bullion more expensive for holders of other currencies, and the potential for energy-induced inflation can increase the odds of central banks raising interest rates. Higher policy rates are generally negative for a non-yielding asset like gold. At 04:09 ET, spot gold had fallen 0.8% to $4,533.55 an ounce.
Corporate spotlight - Lenovo posts robust quarter
Lenovo Group, the world’s largest PC maker, saw its shares reach a record high after reporting quarterly results that outpaced expectations. The company’s Hong Kong-listed stock jumped as much as 18% to HK$18.7 on the report, marking the highest level the shares have traded at. The stock closed up 15.1% at HK$18.13 on Tuesday, following an earlier 20% surge on Friday after the earnings release.
Lenovo reported March quarter revenue of $21.6 billion and a net profit that rose 479% to $521 million. Its infrastructure solutions division, which comprises AI servers and data-center products, delivered 37% revenue growth and was identified as the fastest-growing part of the business amid strong demand for artificial intelligence computing. The company's core PC, tablet, and smartphone segment benefited from resilient consumer demand and market share gains, aided by expectations of price increases tied to memory chip shortages.
Implications for markets
The combination of renewed military activity, elevated oil prices, and a firmer dollar has created a mixed market backdrop. Equity futures moved higher on Tuesday, supported by corporate earnings and AI-related optimism, but the energy-driven inflation risk remains a key variable that could influence central bank policy expectations and investment flows across commodities, currencies, and equities.
Investors will continue to monitor developments in the Strait of Hormuz, progress — or setbacks — in diplomatic talks between Washington and Tehran, and corporate earnings results that could provide fresh direction for risk assets.