US stock market today: Wall Street futures gain as easing Iran tensions trigger sharp fall in oil prices

US stock futures traded higher on Monday, 3 August, as investor risk appetite improved after US President Donald Trump called off a planned military strike on Iran, triggering a sharp decline in crude oil prices and easing concerns over a broader conflict in the Middle East.

Futures tied to the Dow Jones Industrial Average rose 413 points, or 0.8%, while S&P 500 futures gained 0.6% and Nasdaq-100 futures advanced 0.4%. Monday also marks the first trading session of August, with Wall Street looking to stabilise after a volatile July.

Trump said late on Saturday that he had suspended planned military strikes against Iran pending renewed diplomatic talks aimed at ending the conflict and restoring cargo traffic through the Strait of Hormuz, one of the world's most critical oil shipping routes.

In a post on social media, Trump said Middle East allies had agreed on the broad framework of a peace deal, including the reopening of the strait, prompting him to cancel the planned strikes. The move is the latest in a pattern where the US President has threatened military action before opting for diplomacy.

The latest development follows a week of intense military exchanges between the US and Iran after Tehran launched attacks on American military installations across the Middle East. Since the conflict escalated, investors have closely monitored developments surrounding the Strait of Hormuz, through which nearly 20% of the world's seaborne oil trade passes.

While easing geopolitical tensions supported market sentiment, investors remain focused on broader macroeconomic risks.

Concerns over elevated AI-related valuations, persistent inflation, and the outlook for interest rates continue to dominate trading, with attention now turning to the US July employment report due on Friday, which could offer fresh clues on the Federal Reserve's next policy move.

Investors are also digesting the Federal Reserve's latest policy signals. Although the central bank kept its benchmark interest rate unchanged at 3.50%-3.75% for a fifth consecutive meeting last week, the decision was not unanimous.

Three Fed officials dissented, arguing that rates should have been raised immediately, and later warned that delaying further action could require even more aggressive tightening if inflation remains elevated.

Meanwhile, the Personal Consumption Expenditures (PCE) Price Index—the Fed's preferred inflation gauge—showed prices rising 0.1% month-on-month in June, taking the annual inflation rate to 3.7%, broadly in line with market expectations.

While the Fed reiterated its commitment to restoring price stability, policymakers stopped short of signalling when further policy tightening might be warranted.

Crude oil prices plunge 7%

Crude oil prices came under heavy selling pressure after Trump's announcement reduced fears of an immediate supply disruption in the Middle East. Prices were also weighed down by another modest increase in production quotas announced by major OPEC+ producers.

Brent crude fell more than 7% to an intraday low of $81.55 a barrel, while US West Texas Intermediate (WTI) crude dropped 7% to $78.95 per barrel.

Oil prices have remained highly volatile since the US and Israel launched attacks on Iran in late February, with both Brent and WTI surging above $100 per barrel multiple times on fears of supply disruptions.

While elevated crude prices have heightened inflation concerns, they also boosted earnings for major US oil producers during the June quarter, leading to a sharp increase in profitability.

(With inputs from Bloomberg and AP)

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