U.S. stock index futures declined despite Iran and Israel announcing a temporary halt to their exchange of strikes, while semiconductor stocks managed to recover part of the sharp losses they suffered during the previous week.
The futures market performance followed a mixed session on Wall Street, where semiconductor shares regained some momentum, while other sectors remained cautious amid ongoing uncertainty over the economic implications of tensions in the Middle East, particularly regarding energy prices, inflation, and investor appetite for risk assets.
Although tensions between Iran and Israel eased following a U.S. led call for de escalation, markets remained on alert as Tehran warned that attacks could resume if Israel continued its operations against Hezbollah in Lebanon. Developments surrounding the Strait of Hormuz also remained a significant source of concern, with fears of potential disruptions to global energy supplies and higher oil prices, which could eventually fuel inflationary pressures.
Meanwhile, U.S. President Donald Trump stated that the United States was approaching what he described as a “complete victory” within two weeks and projected a sharp decline in oil prices if regional tensions continue to ease. However, investors remained cautious, citing the lack of clear assurances regarding the durability of the ceasefire and the full resolution of geopolitical risks.
On Wall Street, major indexes delivered mixed performances following substantial losses in the previous week. The Nasdaq led recovery efforts, supported by renewed demand for semiconductor stocks after a selloff driven by concerns over the sustainability of profits linked to the artificial intelligence boom. In contrast, the Dow Jones Industrial Average remained under pressure due to worries about the potential economic and inflationary impact of the conflict.
The U.S. dollar also edged lower as investor risk appetite improved following President Donald Trump’s call for de escalation. The reduced demand for safe haven assets weighed on the greenback, while market participants awaited U.S. inflation data due later this week, which could play a key role in shaping interest rate expectations.
The dollar had ended the previous week with its strongest weekly performance since mid March, supported by stronger than expected May nonfarm payrolls data. The report reinforced expectations that the Federal Reserve may maintain a restrictive monetary policy stance for longer, highlighting the resilience of the labor market while keeping inflation at the center of policymakers’ concerns.
Market attention is now focused on the U.S. Consumer Price Index (CPI) report for May, scheduled for release on Wednesday. The data is considered a key indicator for assessing the inflation outlook and the impact of rising energy and shipping costs on consumer prices. Its importance has increased following the stronger than expected employment report, making markets particularly sensitive to any reading that could support higher interest rates for an extended period.
In currency markets, the Japanese yen posted modest gains against the U.S. dollar but remained above the 160 level, a threshold that has previously prompted intervention by Japanese authorities. This came despite a downward revision to Japan’s first quarter GDP growth estimate to 1.8% from 2.1%, reflecting weaker business investment amid uncertainty and higher oil prices.
However, Japan’s trade surplus, supported by strong demand for AI related semiconductors, helped offset some of the weakness in corporate investment. Among major European currencies, the euro rose modestly to $1.1530, while the British pound held steady near $1.3340, as the U.S. dollar continued to dominate overall currency market trends.
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