Markets Remain Cautious as US-Iran Tensions and Fed Policy Risks Weigh on Sentiment

Index Update

US stock indexes ended lower on Friday, with the S&P 500 down 0.05%, Nasdaq 100 falling 1.1%, and Dow slipping 44 points, as chipmakers retreated after Thursday’s Micron-led rally. Losses were partly limited by lower oil prices and easing inflation concerns, though sentiment stayed cautious amid renewed concerns over the fragile US-Iran ceasefire.

Market Movers

Among the top-performing stocks of the session Sadot Group Inc. surged 247.09%, while INVO Fertility, Inc. rallied 97.58%. On the losing side, Anghami Inc. fell 34.42%, while America's Car-Mart, Inc. declined 31.40%, making them the weakest performers during the trading day.

Commodities Update

WTI crude recovered to around USD 70 per barrel and Brent rose above USD 72 per barrel on Monday, rebounding modestly from four-month lows after renewed US-Iran exchanges over the Strait of Hormuz. Although both sides carried out retaliatory strikes following attacks on commercial vessels, they agreed to suspend further military action ahead of peace talks in Doha later this week. Market sentiment was supported by expectations that diplomatic negotiations could help ease supply disruption risks, while shipping activity through the Strait of Hormuz continued to improve following the interim peace agreement, despite ongoing caution among shipowners and congestion from vessels still stranded in the Persian Gulf.

Gold eased to around USD 4,050/oz and silver slipped to about USD 58.5/oz on Monday, ending a two-day rebound as renewed US-Iran tensions around the Strait of Hormuz lifted oil prices and revived inflation concerns. However, losses were limited after both sides agreed to pause further attacks ahead of peace talks in Doha, while investors awaited US jobs data and ISM Manufacturing PMI for further signals on the Federal Reserve’s policy outlook.

Macro Updates

The dollar index held near 101.3 on Monday after touching a one-year high last week, as investors awaited US jobs data for further Fed policy signals. Hawkish remarks from Fed Chair Kevin Warsh supported expectations of three rate hikes this year, while renewed US-Iran tensions and higher oil prices kept inflation concerns in focus despite planned peace talks in Doha.

Bonds Commentary

The US 10-year Treasury yield held near 4.38% on Monday after last week’s sharp decline, as investors awaited key jobs data for clues on labor market strength and Fed policy. Hawkish comments from Fed Chair Kevin Warsh kept rate-hike expectations elevated, while renewed US-Iran tensions and higher oil prices added to inflation concerns despite planned peace talks in Doha.

Futures Update

US stock futures rose on Monday as reports of a US-Iran pause in attacks ahead of Doha peace talks eased geopolitical concerns. The rebound followed a mixed week on Wall Street, where investors shifted away from technology stocks, dragging the S&P 500 down 1.95% and Nasdaq 4.6%, while the Dow gained 0.6%; megacap tech names such as Nvidia, Alphabet, Apple, Amazon, and Meta led the declines.

After a mixed performance in the previous session, U.S. stocks are likely to come under pressure in early trading on Friday, with S&P 500 futures down 0.05%, signaling a weaker open. Technically, the S&P 500 retains a constructive medium-term outlook as it continues to trade above its 50-day EMA, although short-term momentum has softened with the index slipping below its 20-day EMA and the RSI remaining in neutral territory. Further downside could emerge if the index breaks below the key 7,320-7,350 support zone, while a recovery above the 20-day EMA near 7,420 would be needed to revive bullish sentiment.