US stock futures jumped on Tuesday as President Trump told Israel to halt its strikes on Iran, amid hopes that a fragile US-brokered ceasefire between the two will hold and lay the groundwork for a more permanent end to hostilities.
Dow Jones Industrial Average futures (YM=F) rose 0.7%, while those on the S&P 500 (ES=F) moved up 0.8%. Contracts on the tech-heavy Nasdaq 100 (NQ=F) led the advance, up 1%.
A relief rally has been building amid hopes for a lasting end to a 12-day-old conflict that has spooked markets with its risks of squeezed oil supply and escalation into full-blown war. On Monday, US stocks rose as Iran’s response to US attacks signaled a desire to deescalate tensions.
On Tuesday, President Trump said that the pause in hostilities had begun. Meanwhile, Israel confirmed it had agreed to a truce brokered by the US and announced by Trump late on Monday.
But just hours later, Israel accused Iran of breaching the ceasefire, saying it had detected missile launches from the country and would respond forcefully to them. Tehran has denied it launched strikes.
Trump has since called on Israel to stop its bombardment, in a post to social media: “ISRAEL. DO NOT DROP THOSE BOMBS. IF YOU DO IT IS A MAJOR VIOLATION. BRING YOUR PILOTS HOME, NOW!” he wrote.
Oil prices sank overnight as the prospect of a truce eased worries about disruption to supply of crude, centered on the risk that Iran would block the key Strait of Hormuz conduit for tankers. At one point, Brent futures (BZ=F) dipped below their level just before hostilities broke out almost two weeks ago.
Brent was still over 3% lower near $68 per barrel as the truce came into question, while West Texas Intermediate (CL=F) also fell to hover at around $66 per barrel.
Investors are also waiting for Jerome Powell to testify before the House Financial Services Committee, as Trump turns up the pressure on the Federal Reserve chair to cut interest rates.
Powell is likely to say that the Fed can afford to hold rates steady as officials evaluate the unknown effect of Trump’s trade policies on inflation. But some Fed watchers worry about the impact of a sustained rise in oil prices amid the Israel-Iran war.
Carnival Corporation (CCL), FedEx (FDX), BlackBerry (BB) are due to report earnings.
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