Iran’s response to U.S. strikes in focus; PMIs ahead - what’s moving markets
Investing.com - U.S. stock futures are muted and oil climbs in the aftermath of sudden U.S. strikes on Iranian nuclear facilities over the weekend. Uncertainty still surrounds Iran’s response to the attacks and how they could impact global oil and gas supplies, while U.S. President Donald Trump speaks about possible "regime change" in the country. Elsewhere, the U.S. Senate is aiming to pass its version of a Trump-backed fiscal bill and traders are keeping tabs on business activity data due out later on Monday.
1. Futures subdued
U.S. stock futures hovered around the flatline, as investors assessed the fallout from a U.S. decision to carry out strikes against Iranian nuclear sites over the weekend.
By 03:36 ET (07:36 GMT), the Dow futures contract had slid by 25 points, or 0.1%, while S&P 500 futures and Nasdaq 100 futures were mostly unchanged.
The main averages on Wall Street ended in the red on Friday, with investors anxiously eyeing developments in a multi-day air war between Israel and Iran -- and the potential involvement of U.S. military forces in the conflict.
President Trump erased much of this uncertainty when he announced that strikes on three nuclear facilities in Iran had been conducted on Saturday. Markets are now keen to see how the decision, which came after Trump previously suggested that he would take as long as two weeks to deliberate on a possible strike on Iran, could impact sentiment, inflation and interest rates.
2. Oil rises after U.S. strike on Iran
Much of the worry over price growth stems from oil, with traders warning in recent days that an escalation in the Israel-Iran fighting could lead to a disruption of key crude supplies, particularly in the Strait of Hormuz along Iran’s southern coast.
Some analysts have flagged worries that a spike in oil prices could refuel inflationary pressures, potentially leading the Federal Reserve to further delay potential interest rate cuts.
Brent crude futures for August jumped by 0.8% to $76.11 per barrel by 03:38 ET on Monday and West Texas Intermediate crude future rose by 0.9% to $74.48 a barrel. Both of the contracts have pared back some earlier gains.
"Since the U.S. targeted Iranian nuclear facilities over the weekend, supply risks for energy markets have increased significantly amid uncertainty about how Iran will retaliate," said Warren Patterson, Head of Commodities Strategy at ING, in a note.
3. Investors eyeing Iran’s response
Tehran has yet to give any clear indication of how it plans to respond to the U.S. attack, saying that it reserved all options to defend itself.
The Islamic republic has also warned of "everlasting consequences" and stepped up its aerial bombardments of Israel, which kicked off the violence 11 days ago with its own surprise strikes on Iranian nuclear infrastructure.
Iran has called Trump a "gambler" and seemed to hint that the weekend strikes have expanded the range of legitimate targets for its military. Trump, meanwhile, raised the question of regime change in Iran in a social media post on Sunday.
Media reports in Iran have suggested that the country is mulling blocking the Strait of Hormuz, a key artery for global oil and gas supplies being sent around the world from Middle East.
Other reports have said that Iran may target one of several U.S. military bases located throughout the region.
Some analysts have argued that, for financial markets, although tensions in the Middle East have now intensified, the strikes have removed at least one shroud of uncertainty around whether Trump would move to strike Iran.
"With the overhang of uncertainty lifted somewhat, the weekend events could wind up being a net positive," analysts at Vital Knowledge said in a note to clients. Still, they flagged that, "once geopolitics fade from the headlines," investors will still be facing "headwinds" from longstanding issues like tariffs and fiscal policy.
4. Senate’s version of tax-and-spending bill in focus
The U.S. Senate is reportedly aiming to hold a vote on their version of a massive tax-and-spending package this week.
Republican lawmakers are pushing to approve their update to the so-called "One Big Beautiful Bill Act," send it back to the House, and then have it placed on Trump’s desk for signing by a self-imposed deadline of July 4.
Backed by Trump, the measure includes the extension of 2017 tax cuts instituted during his previous term in office and increased expenditures on defense and border security. Some of these costs would then be offset by slashes to expenditures on entitlements like Medicaid, a federal health insurance program for low-income Americans that covers more than 71 million people.
But the Senate parliamentarian, the rules arbiter for the upper chamber, has issued recent guidelines stating that a selection of items in the package do not fall within budgetary rules. The nonpartisan referee flagged that Republican provisions such as a reduction in funding for the Consumer Financial Protection Bureau and other financial watchdogs may not be passed by a simple majority in the Republican-controlled Senate.
The GOP has been planning to use the so-called budget reconciliation process to help overcome Democratic opposition and pass the broader fiscal bill. In this process, some budget-related provisions can be approved by a simple majority instead of the Senate’s typical 60-vote threshold.
5. PMIs ahead
On the economic calendar, investors will be keeping tabs on business activity figures for June.
S&P Global’s manufacturing purchasing managers’ index is seen dipping to 51.1 from 52.0, while the services gauge is tipped to fall to 52.9 from 53.7.
The numbers will serve as a precursor to a range of economic data points due out this week, including a reading of consumer confidence on Tuesday and an inflation-measure closely followed by the Federal Reserve on Friday.
Consumer confidence in the U.S. has slumped over the past few months, as Americans express fears over the impact of Trump’s sweeping tariff agenda on inflation and growth. Yet price gains have remained relatively benign and hopes for a détente in global disputes over the levies have been bolstered by talks between the U.S. and China.
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