Overview
Futures linked to the main U.S. stock indices moved notably higher on Monday, driven by media accounts that the United States and Iran have agreed in principle to a deal to halt their more than two-month-old conflict. While the initial reports spurred risk-on positioning across equity markets and a sharp drop in crude prices, statements from officials on both sides suggested that a finalized pact may not be immediate.
1. Futures surge
By 03:44 ET (07:44 GMT) on Monday, futures tied to major U.S. benchmarks had advanced substantially: the Dow futures contract was up 399 points, or 0.8%, S&P 500 futures rose 70 points, or 0.9%, and Nasdaq 100 futures climbed 407 points, or 1.4%. Asian and European stock indices also strengthened on the headlines, though liquidity was expected to be light because U.S. markets were closed for Memorial Day and will resume trading on Tuesday.
Market participants noted that an extended period of diplomacy has already been reflected, to some extent, in asset prices. In a client note, analysts at Capital Economics said the scope for a broad-based relief rally if the Strait of Hormuz were re-opened may have narrowed over time, although they added that some markets still possess more upside than others.
In fixed income, 30-year U.S. Treasury bond futures ticked up by a full point. There was no cash trading on Monday. Last week the 30-year yield, often used as a barometer of geopolitical and economic risk sentiment, briefly rose to its highest level since 2007. As usual, yields and prices move in opposite directions.
2. Iran peace agreement hopes grow
Over the weekend, several media outlets reported that Washington and Tehran had agreed in principle on a framework to end the conflict, citing a senior White House official. Central to the reported accord would be the reopening of the Strait of Hormuz, the key shipping lane off Iran's southern coast through which about one-fifth of global oil supplies flow. That waterway has been effectively closed to tanker traffic for weeks, a development that pushed oil prices higher and sparked concerns about energy-driven inflation worldwide.
Still, Iranian officials appeared to undercut the notion that a final deal was days away. An Iranian foreign ministry spokesperson told Reuters on Monday that while both sides had reached a framework to end the fighting, a potential memorandum of understanding did not include details governing operations in the Strait of Hormuz. Separately, U.S. President Donald Trump wrote on social media that he had instructed his representatives "not to rush into a deal," and said an American blockade on Iranian ports would remain in force until any agreement was "reached, certified, and signed." These comments suggested negotiations remain conditional and subject to further verification.
3. Oil sinks
The weekend reporting was sufficient to trigger a pronounced slide in crude prices, offering tentative relief to markets concerned about a surge in energy-linked inflation. Brent crude futures, the global benchmark, were last down 4.7% at $95.54 a barrel. Despite the fall below recent peaks above $100 a barrel, Brent was still well above its level prior to the outbreak of the war in late February.
Analysts cautioned that markets have seen similar negotiation phases before that ultimately broke down, and that traders may be wary of overreacting to initial headlines. ING analysts wrote that because talks have faltered in the past, the market was likely to be cautious about treating this development as definitive.
Strategists also warned that, even if a formal pact is reached, oil is unlikely to return to pre-war levels quickly. They pointed to an elevated geopolitical risk premium and the conflict's disruptions to global energy supply chains as reasons why prices could remain higher than before the fighting began.
Heightened prospects for sustained energy price pressure have driven expectations that central banks in both developed and emerging markets will respond by raising interest rates. For example, the U.S. Federal Reserve is now forecast to increase borrowing costs by 25 basis points in January 2027, a shift from plans that had been for rate cuts prior to the war.
4. Gold jumps
Spot gold rose as traders re-priced risk and interest rate expectations. By 04:25 ET (08:25 GMT), spot gold had moved up 1.0% to $4,555.21 an ounce, though the metal remained well under pre-war levels.
Gold's appeal is moderated when real and nominal interest rates are higher, as it is a non-yielding asset. At the same time, the U.S. dollar has functioned in many markets as a relative safe haven amid conflict, with some market participants viewing the United States - a major energy exporter - as better positioned to weather an energy disruption. A firmer dollar typically reduces gold's attractiveness to overseas buyers by increasing its price in foreign currencies. The dollar index, which measures the greenback versus a basket of peers, was last trading down 0.2% at 99.02.
5. Delivery Hero rallies amid Uber bid reports
Separately, shares of German food delivery platform Delivery Hero jumped to an 18-month high on Monday after the company disclosed it received an indicative offer from Uber. At 08:15 GMT the stock was up 9.7% at 36.85 euros per share, its strongest showing since late November 2024, valuing Delivery Hero at 11.2 billion euros ($13.04 billion).
The Financial Times reported that Uber may be preparing to raise its bid after one of Delivery Hero’s largest shareholders turned down an earlier approach that valued the company at more than 11.5 billion euros ($13.4 billion). According to that report, Uber had offered 38 euros per share to a major shareholder in recent days, which was declined. Several Delivery Hero investors are reportedly seeking a price north of 40 euros per share for the company as a whole.
Market context and closing observations
The mix of headlines combined to produce a typical market response to tentative diplomatic progress: equities cheered the reduction in immediate geopolitical premium, energy markets priced in the prospect of additional supply flow, and safe-haven assets such as the dollar and gold moved in different directions depending on rate expectations and perceived safety. Analysts suggested caution, noting that negotiations in the past have seen intermittent progress followed by setbacks, and that elevated risks to energy supply chains make a full reversal of recent price moves unlikely even if a formal agreement is struck.
Trading tools note
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