U.S. stock futures climbed modestly early Tuesday as trading resumed after the Memorial Day holiday, but the initial optimism quickly waned amid a sharp spike in oil prices. Brent crude jumped more than 2% to $98.21 a barrel after new U.S. military strikes in southern Iran dashed hopes for a swift peace resolution in the region. The geopolitical jolt sent ripples through markets, with the Nasdaq 100 futures up 0.86% and S&P 500 futures adding 0.66% before retreating.
The renewed focus on energy markets comes as traders brace for a busy week of macroeconomic data and corporate earnings. Consumer confidence figures from the Conference Board are due Tuesday at 10 a.m. ET, with expectations for a slight dip to 92 in May as higher gasoline prices weigh on household sentiment. Later this week, the Federal Reserve's preferred inflation measure—the Personal Consumption Expenditures (PCE) price index for April—will be released on Thursday. The PCE report is critical for assessing whether inflation remains stubbornly high, especially as oil-driven cost pressures threaten to keep price growth elevated.
Higher oil prices not only stoke inflation fears but also raise costs for transportation and logistics, squeezing corporate margins. This dynamic could force the Federal Reserve to maintain or even tighten monetary policy, dashing trader hopes for rate cuts this year. The two-year Treasury yield slipped nearly 7 basis points to 4.0573%, while the 10-year yield fell more than 6 basis points to 4.5083%. Despite the dip, strategists warn that inflation and fiscal risks are likely to persist. Eric Robertsen, head of global research at Standard Chartered, noted that these pressures are expected to be more sustained.
Safe-haven assets saw mixed moves. Spot gold dropped 0.9% to $4,529.50 an ounce, as traders priced in the likelihood of higher-for-longer interest rates. Kelvin Wong, senior market analyst at OANDA, highlighted that there are very high odds the U.S. could hike rates this year. Meanwhile, the U.S. dollar remained under pressure, and bond yields edged lower overall.
In corporate news, this week's earnings lineup includes major reports from Salesforce, Dell Technologies, Costco, Best Buy, and Dollar Tree. Dell and Salesforce results will provide fresh insights into the artificial intelligence spending trend, which has been a key driver of market gains. Nvidia's recent second-quarter revenue forecast of $91 billion—beating Wall Street estimates—remains the benchmark for AI demand. Hedge funds have been piling into technology stocks, with Goldman Sachs noting that global information-technology positions are near record highs, reflecting crowded trades in the sector.
Consumer-focused retailers like Costco and Best Buy will also offer clues on how high fuel prices are affecting spending. Anthony Saglimbene, chief market strategist at Ameriprise, observed that investors are moving beyond earnings season and focusing more on the macro environment. Jim Baird of Plante Moran Financial Advisors echoed that inflation concerns continue to flare.
The broader market remains resilient, with the S&P 500 closing Friday at 7,473.47, up 0.37%. The Dow Jones Industrial Average ended at 50,579.70, gaining 0.58%, while the Nasdaq Composite rose 0.19% to 26,343.97. UBS Global Wealth Management raised its year-end 2026 S&P 500 target to 7,900 from 7,500, citing steady consumer spending and ongoing demand for data-center infrastructure. The bank's strategists said the bull market drivers remain intact, but cautioned that sectors tied to oil and interest rates could be vulnerable if the Strait of Hormuz situation remains unresolved.
However, the outlook is far from certain. Any headline suggesting a peace breakthrough could send oil prices lower and boost risk-on trades. Conversely, further escalation or an upside surprise in inflation data could revive rate-hike bets. Nomura has already dropped its call for a Fed cut in 2026, and futures markets now price in about a 58% chance of a rate hike by year-end, according to Reuters. The interplay between geopolitical tensions, inflation, and monetary policy will keep markets on edge in the days ahead.
