Stock Futures Drop, Oil Gains on Escalation Risk: Markets Wrap
(Bloomberg) — A rally in equities eased, crude oil rebounded and gold extended its slump as fragile optimism around a potential de-escalation in Middle East tensions gave way to renewed caution.
Equity-index futures for the S&P 500 Index fell 0.6% and European shares were set to drop 0.8% at the open as sentiment weakened after the Wall Street Journal reported that US allies in the Persian Gulf are inching toward joining the fight against Iran. Adding to the downbeat tone, Iran’s deputy speaker ruled out talks with the US, echoing similar comments from other officials in the regime.
As sentiment soured, Brent jumped 3.6% to about $104 a barrel. The dollar strengthened and yields on the two-year Treasury rose five basis points to 3.90% on expectations that higher oil prices may boost the chances of an interest-rate hike by the Federal Reserve. Gold slid 1.2%, set for its longest losing daily streak on record, and Asian stocks pared earlier gains to rise 1.3%.
The shift marked a reversal from Monday’s relief rally, when Wall Street stocks surged and oil slumped after President Donald Trump signaled a delay in strikes on Iranian energy assets. The conflict showed few signs of easing and the Strait of Hormuz — crucial for the flow of oil from the Middle East — remained effectively shut with only a trickle of vessels making their way through.
Tuesday’s moves suggest investors are dialing back optimism that followed Trump’s signal of a delay in strikes, which was seen as a potential step toward de-escalation in the Middle East. Renewed tensions risk keeping oil prices elevated, potentially stoking inflation and reinforcing expectations that policymakers may delay easing or even tighten policy further.
“I will not put too much hope on this bet for now until I see Iran’s next course of action in this war,” said Gerald Gan, chief investment officer at Reed Capital Partners in Singapore. Gan said he has increased his cash exposure, while adding put options on the S&P 500 Index.
What Bloomberg’s Strategists Say…
“Brent opened above $100 a barrel amid signs that conflict in the Middle East is far from over. If there are further signals that send crude prices noticeably higher, then another day of whiplash across assets would be the result.”
— Garfield Reynolds, MLIV Asia Team Leader. Click here for the full analysis.
In other corners of the market, silver dropped 2.5% to $67.40 an ounce, while Bitcoin led cryptocurrencies lower, trading around $70,200.
Headlines about the Middle East continue to sway markets, with traders staying focused on the Hormuz Strait. Since the conflict began, disruptions to traffic through the waterway have driven sharp price swings and heightened inflation risks, leaving progress in US-Iran talks pivotal to stabilizing energy markets and broader financial conditions.
Trump told reporters on Monday that he was holding off on striking Iranian energy infrastructure for five days, citing “major points of agreement” with the country. The abrupt shift caught traders off guard as there was little sign of diplomatic progress before the US president’s social media post.
“Markets will likely take a cautious approach from here as there is still uncertainty over whether actual talks are being carried out given Iranian denials,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd.
The biggest disconnect in the market is between rates and equities, wrote Mohit Kumar, chief economist and strategist for Europe at Jefferies International Ltd.
Front-end rates have sold off aggressively while risky assets have remained relatively well contained, he wrote.
“For once we believe that the risky assets are more right and the rates market reaction has been exacerbated by position unwinds,” he wrote.
Tensions remained high in the Middle East. A gas pressure-regulation station and an associated administrative building were targeted in Iran’s central Isfahan province in recent US–Israeli attacks, the semi-official Fars news agency reported. Iran also launched a new wave of missiles at Israel.
Markets remain on “hyper alert” for the next development, said Anna Wu, a cross asset strategist at Van Eck Associates Corp.
“Most investors are still waiting for some sort of talk to be confirmed between Iran and the US for clarity,” she said.
Corporate News:
Apollo Global Management Inc. fell 2.6% in extended trading after curbing redemptions from one of its largest non-traded private credit funds for retail investors. Estée Lauder Cos. said it’s in talks to buy Puig Brands SA in a deal that would create a cosmetics giant with about $20 billion in annual sales. The European Union and Australia agreed to a free-trade deal, wrapping up almost a decade of talks as the two sides push to tighten ties and reinvigorate a rules-based order that’s under assault from the Trump administration. Netgear Inc. shares jumped 13% in extended trading after the Federal Communications Commission ordered a ban on the import of new models of foreign-produced consumer wireless routers after an interagency panel determined they threaten national security. Nintendo Co. is cutting back the production of Switch 2 after demand for the $450 gaming console trailed the company’s expectations during the year-end holiday season, particularly in the US. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.6% as of 2:51 p.m. Tokyo time Japan’s Topix rose 1.8% Hong Kong’s Hang Seng rose 1.6% The Shanghai Composite rose 0.6% Euro Stoxx 50 futures fell 0.8% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.2% to $1.1587 The Japanese yen fell 0.1% to 158.62 per dollar The offshore yuan fell 0.1% to 6.8943 per dollar Cryptocurrencies
Bitcoin fell 0.9% to $70,279.57 Ether fell 1.2% to $2,134.77 Bonds
The yield on 10-year Treasuries advanced four basis points to 4.38% Japan’s 10-year yield declined 3.5 basis points to 2.270% Australia’s 10-year yield declined seven basis points to 5.04% Commodities
West Texas Intermediate crude rose 3.9% to $91.54 a barrel Spot gold fell 1% to $4,362.96 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Momoka Yokoyama, Abhishek Vishnoi, Ruth Carson and Winnie Hsu.
©2026 Bloomberg L.P.
