March 31 (Reuters) – U.S. stock index futures gained on Tuesday, as markets welcomed a report signaling a potential de-escalation in the Middle East conflict that has set the S&P 500 and the Dow for their biggest monthly decline in years.
The Wall Street Journal on Monday reported that U.S. President Donald Trump told aides he was willing to end the military campaign against Iran even if the Strait of Hormuz remained largely closed.
The report soothed some market nerves after a month-long conflict that has battered global markets and left the S&P 500 and the Dow on track for their biggest monthly falls since September 2022.
Oil prices were volatile on Tuesday, but were headed for a record monthly gain. The S&P 500 energy index has gained over 11% so far in March, the only sector set to end the month in the positive territory.
The Dow and the Nasdaq last week ended 10% below their record high closes, confirming a correction. The small-cap Russell 2000 confirmed it earlier this month.
Isabella Mateos Y Lago, an economist at BNP Paribas, said investors were not expecting the war to cause meaningful damage to growth, with many analysts sticking to their pre-war end-2026 U.S. index targets, and making little downgrades to earnings forecasts, as cash holdings remained below Trump’s tariff announcement levels.
“As long as the possibility of scenarios that inflict only manageable growth costs persists, it is preferable that financial markets do not amplify headwinds from higher energy prices and more hawkish central banks.”
At 05:08 a.m. ET, Dow E-minis were up 417 points, or 0.92%, S&P 500 E-minis were up 57 points, or 0.89% and Nasdaq 100 E-minis were up 194.25 points, or 0.84%.
Investors will also watch out for the job openings and labor turnover survey (JOLTS) for February, the first of the labor market reports due in the holiday-shortened week.
Comments from Fed policymakers, including Austan Goolsbee and Michelle Bowman, will also be parsed for any clues on the Federal Reserve’s monetary policy path after Chair Jerome Powell said on Monday the Fed can wait to assess the impact from the war.
The oil spike stemming from the Iran conflict has revived inflation worries, prompting money market participants to price out any easing from the Fed this year, compared with two cuts that they had expected before the war broke out, per CME Group’s FedWatch Tool.
Among premarket movers, McCormick shares gained 4.2% after Unilever said it was in advanced talks to combine its food business with the spice maker.
Emerson Electric was up 2.2% after Jefferies assumed coverage of the stock with a “buy” rating.
(Reporting by Purvi Agarwal in Bengaluru; Editing by Shinjini Ganguli)
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