Markets Navigate Middle East Tensions Ahead of Fed Decision

Image Source : Krish Capital Pty Ltd

Index Update: U.S. stocks closed higher on Monday, with the Dow up 0.75%, the S&P 500 rising 0.94%, and the Nasdaq gaining 1.52%, as investors largely brushed off Middle East tensions. Gains were led by communication services, technology, and consumer discretionary sectors, while utilities, health care, and energy underperformed. Attention now shifts to the Federal Reserve’s upcoming policy decision and retail sales data, which could provide insights into the economy’s strength.

Market Movers: On Monday, the top gainers were SRM Entertainment, Inc (+533.79%), followed by Regencell Bioscience Holdings Limited (+283.13%). On the contrary Robin Energy Ltd (-60.57%) and Hyperscale Data, Inc (- 54.57%) declined the most the same day.

Commodities Update: WTI and Brent crude oil futures each rose over 1% on Tuesday, trading around $72.7 and $74.2 per barrel respectively, as geopolitical tensions between Israel and Iran rattled markets. The rise follows Israel’s intensified airstrikes on Tehran, including hits on state media buildings, prompting U.S. President Donald Trump to call for Tehran’s evacuation. While Iran has signaled a desire to de-escalate and resume nuclear negotiations, oil prices experienced heavy volatility on Monday, fluctuating within an $8 range before ending lower. Traders are also monitoring potential new U.S. tariffs and OPEC+’s rising production quotas, which could further impact market stability.

Gold climbed toward $3,390 per ounce as investors sought safe-haven assets amid the intensifying Middle East conflict. The metal had fallen 1.4% on Monday, its steepest drop in a month, on hopes of de-escalation from Iran. Market participants are now focused on upcoming U.S. economic data—retail sales and industrial production—as well as the Federal Reserve’s policy meeting concluding Wednesday. While no rate change is expected, traders are looking for signals regarding future rate cuts.

Macro Update: The 10-year U.S. Treasury yield hovered around 4.43% on Tuesday, stabilizing after recent gains as investors awaited the Federal Reserve's policy decision. While no rate change is expected, markets are keen for guidance amid reduced expectations for cuts due to inflation and trade tensions. Retail sales data due later today may offer further economic signals. Geopolitical risks also remained prominent, with President Trump urging Tehran’s evacuation amid escalating Israeli strikes and cutting short his G7 summit attendance to monitor the situation.

Futures Update: U.S. stock index futures declined as investor concerns grew over the Israel-Iran conflict, while markets awaited key retail sales data and the Federal Reserve’s policy meeting. Dow, S&P 500, and Nasdaq futures all fell about 0.6%. This came after Wall Street’s main indexes closed higher in the prior session, as fears over the recent airstrikes appeared to ease, with the S&P 500, Nasdaq, and Dow all posting solid gains.

After moving sharply higher on a weekly basis during the session, the stock market gave back some of its gains on Monday but continued to perform strongly overall. The S&P 500 declined by 56.16 points, or 0.94%, closing at 6,033.12. From a technical analysis perspective, the index is currently near a confluence point and facing resistance from a trendline, suggesting a possible period of consolidation in the near term. Nevertheless, the index remains above its key exponential moving averages, which supports a positive outlook and indicates these levels could serve as near-term support. The primary support level is around 5,888, while resistance is expected near 6,066.