Investing.com — U.S. stocks gave up a chunk of their opening gains on Monday, while oil continued to climb, as investors assessed ongoing fighting in the Middle East that has entered a second month.
At 10:00 ET (14:00 GMT), the benchmark S&P 500 index was up 0.1% to 6,377.79 points, the tech-heavy was down 0.1% to 20,937.52 points, and the blue-chip climbed 0.4% to 45,330.04 points.
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The main averages on Wall Street sank at the end of last week, even after President Donald Trump’s decision to delay until April 6 a deadline for Iran to reopen the Strait of Hormuz or face U.S. attacks on domestic power facilities.
“[M]arkets remain very much on edge about the Middle East, and the consensus view is still that the conflict is set to escalate,” analysts at Vital Knowledge said in a note to clients.
A sharp spike in oil since the outbreak of the conflict in late February has sparked worries over renewed inflationary pressures in countries around the world, which could in turn spur on central bank interest rate hikes. Government bond yields have risen against this backdrop, including U.S. Treasuries, weighing on stocks.
Traders are no longer pricing in any rate easing by the Federal Reserve this year, versus expectations for two drawdowns prior to the war, according to CME’s FedWatch Tool. Key labor market and business activity data is due out this holiday-shortened week, and Fed Chair Jerome Powell is set to speak later in the day.
Brent hits $115
With the conflict in the Middle East raging, the Wall Street Journal has reported that President Donald Trump is considering a potentially complex and risky military operation to remove almost 1,000 pounds of uranium from Iran.
Meanwhile, troops from the U.S. 31st Marine Expeditionary Unit are said to have arrived in the Middle East, in a move reportedly aimed at giving Trump more options as he mulls over the next phase of the war. A Washington Post report said the Pentagon was preparing for weeks of ground operations in Iran.
Tehran has vowed to destroy any U.S. forces that attempt to stage a ground incursion into the country.
At least 12 U.S. troops were injured in an Iranian attacks on an air base in Saudi Arabia over the weekend. Iran-aligned Houthi rebels in Yemen joined the fray for the first time as well, firing attacks at Israel and exacerbating already heightened fears around disruptions to key energy supplies.
Should the Houthis target the Bab al-Mandab Strait in particular, the Vital Knowledge analysts flagged that a global shipping crisis already caused by the effective closure of the Strait of Hormuz off the southern coast of Iran would be “dramatically amplif[ied].” The Bab al-Mandab Strait is a key choke point for vessel traffic which connects the Red Sea to the Gulf of Aden and the Indian Ocean.
Brent crude futures expiring in May topped $115 a barrel on Monday, and were last up 2.6% to $115.47 a barrel.
Trump threatens to strike Iran energy infrastructure, Kharg island
Trump suggested that direct negotiations with Iran were ongoing and that a deal with Tehran could be close.
Speaking to reporters aboard Air Force One, Trump said negotiations were going “extremely well,” and that a deal with Iran was possible, touting “regime change” in Tehran after U.S. strikes killed several top Iranian officials in the past month.
“I think we’ll make a deal with them, but it’s possible we won’t,” the president said. Responding to a reporter’s question, Trump said “I do see a deal with Iran, could be soon,” although he did not offer a specific timeline.
Iran has largely denied that direct talks with Washington had taken place since the onset of the war, and has called for a cessation in hostilities before any negotiations can take place.
Trump later on Monday on his Truth Social service said the U.S. was in “serious discussions with A NEW, AND MORE REASONABLE, REGIME to end our Military Operations in Iran.”
“Great progress has been made but, if for any reason a deal is not shortly reached, which it probably will be, and if the Hormuz Strait is not immediately ’Open for Business,’ we will conclude our lovely ’stay’ in Iran by blowing up and completely obliterating all of their Electric Generating Plants, Oil Wells and Kharg Island (and possibly all desalinization plants!), which we have purposefully not yet ’touched,’” the president added.
Ambar Warrick and Scott Kanowsky contributed to this article