US stock futures rallied on Monday after President Donald Trump postponed a planned military strike on Iran, a move that pushed crude prices sharply lower and tempered immediate inflation worries. At approximately 7:00 AM ET, Dow Jones Industrial Average futures climbed 410 points, or 0.78%, while S&P 500 and Nasdaq 100 contracts gained 0.56% and 0.41%, respectively.
The relief rally, however, remains fragile as geopolitical uncertainties persist. Iran has denied that direct negotiations with Washington are underway, and upcoming manufacturing data could reshape interest-rate expectations. Additionally, Palantir's earnings report will test whether investor confidence in AI spending has truly recovered following July's semiconductor sell-off and renewed volatility in South Korean chip stocks.
1. Iran diplomacy lifts futures, but gap remains
Trump held off on a major strike after Gulf allies urged more time for diplomacy, stating that talks aimed at reopening the Strait of Hormuz and addressing Iran's nuclear program would begin on Monday. Tehran challenged that account, with Iran's foreign ministry saying it is not negotiating directly with the US and that discussions with Oman concern a temporary safe route for shipping.
Futures are therefore pricing a lower near-term risk of escalation, not a settled agreement. Any sign that the Oman channel is stalling, or that attacks on shipping continue, could quickly return the geopolitical premium to oil.
2. Oil's slide eases inflation pressure
Brent crude fell about 7% to roughly $83.5 a barrel, while West Texas Intermediate dropped more than 6% to around $79.5. The move unwound part of July's war premium, offering relief to airlines, transport groups, and consumer-facing companies, while weighing on energy producers.
OPEC+ added to the pressure by agreeing to raise September output by 188,000 barrels a day, completing the planned reversal of 1.65 million barrels a day of voluntary cuts introduced in 2023. The sell-off may still prove unstable because Hormuz traffic remains disrupted and diplomacy is contested.
3. Manufacturing data could disturb the rates trade
The final S&P Global manufacturing PMI is due before the Institute for Supply Management's July factory survey at 10 AM ET. The ISM index stood at 53.3 in June, marking a sixth consecutive month of expansion and remaining above the 50 level separating growth from contraction.
A strong report would support cyclical shares but could lift Treasury yields if prices remain elevated. A weaker reading would help bonds and technology stocks, while reviving concerns about economic momentum. The prices-paid and new-orders components may therefore matter more than the headline figure.
4. Yen intervention weakens the dollar
The yen traded near 156 to the dollar after the US and Japan confirmed coordinated intervention, pulling it away from the 40-year low near 164 reached last week. The dollar index slipped below 100, while the 10-year Treasury yield fell towards 4.69% as lower oil reduced inflation anxiety.
That backdrop supports multinational US companies and rate-sensitive technology shares. Its durability is uncertain, however. Japan's policy rate remains far below the Fed's 3.5% to 3.75% range, and currency strategists doubt intervention alone can reverse the yen's decline without a narrower interest-rate gap. For more on this, see our analysis of the yen's recent surge.
5. Palantir and Korean chips test the AI rebound
Palantir reports after the close and has guided for second-quarter revenue of $1.797 billion to $1.801 billion, with adjusted operating income of $1.063 billion to $1.067 billion. Wall Street expects about 80% revenue growth, making the report a test of whether US commercial and government demand can justify the company's valuation.
The regional signal is less reassuring. South Korea's Kospi fell about 5% on Monday after Friday's record rebound, with Samsung Electronics and SK Hynix dropping roughly 9%. This follows a period of extreme volatility in Korean chip stocks, as highlighted in our recent coverage of SK Hynix and Samsung's surge.
Marriott and Tyson Foods report before the bell, while reported merger discussions between AstraZeneca and Bristol Myers Squibb have also driven sharp premarket moves. Investors will also be watching for any further developments in AI-related earnings, especially after Lam Research's strong results last week.
This article is for informational purposes only and does not constitute financial advice.
