Wall Street futures rose Tuesday on reports that Washington and Tehran are nearing an arrangement to end six months of conflict, even as prediction markets put just a 13.5% chance on a deal by the August 15 deadline. The Strait of Hormuz standoff continues to drive oil prices and complicate the Federal Reserve's inflation outlook.
US stock futures pointed higher on Tuesday after Pakistan's defence minister, Khawaja Asif, told Bloomberg News that signals from recent days indicated a peace agreement was close, shortly after Qatar's foreign ministry said Iran-Oman talks had reached an advanced stage. Yet prediction-market pricing tells a different story: the odds of a U.S.-Iran agreement by the August 15 deadline stand at 13.5% YES, reflecting a decreased probability of a breakthrough.
Strait of Hormuz standoff intensifies
Iran continues to demand U.S. compliance with its conditions for reopening the strait, and the U.S. has reportedly fired on a cargo ship, intensifying military tension. Iran insists on the withdrawal of U.S. forces and the lifting of sanctions before it will resolve the standoff, while the U.S. is pushing for unrestricted shipping and an end to attacks on vessels.
Oil swings on the exchange of demands
Brent crude turned lower after touching one-week highs during the session. The reversal followed a run-up on Monday, when an exchange of demands between the U.S. and Iran over reopening the strait pushed oil prices up 5%. According to Reuters, Robert Pavlik, senior portfolio manager at Dakota Wealth, said: "any positive news is better than negative news."
Fed policy caught in the crossfire
Rising energy costs tied to the conflict have stoked inflation concerns and clouded the global economic outlook, complicating the path for central banks. Consumer and producer price data due later this week could shape expectations for the Federal Reserve's next move, given Chair Kevin Warsh's focus on the inflation mandate and his stance on trimming forward guidance. Traders are split almost evenly on whether the Fed raises rates in September or holds off, according to the CME FedWatch Tool.
At 8:56 a.m. ET, Dow E-minis were up 54 points, or 0.1%, while S&P 500 E-minis added 11.5 points and Nasdaq 100 E-minis gained 103 points, or 0.35%. Wall Street's main indexes had closed lower on Monday as investors assessed the Middle East situation, though the S&P 500 and the Dow hovered near all-time highs.
Sources: Reuters via Yahoo Finance, Crypto Briefing
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