U.S. stock futures rally as oil prices retreat

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U.S. stock futures rally

Highlights

Dow futures gained 1.01%, S&P 500 0.98%, and Nasdaq 100 1.63%.
Oil prices fell after the U.S. and Iran paused military action.
Investors now await major tech earnings and the Fed meeting.
AI spending guidance could drive the next market move.

Dow Jones futures rose 527 points, or 1.01%, to 52,651, while S&P 500 futures gained 0.98% to 7,520.75, and Nasdaq 100 futures advanced 1.63% to 28,743.75. The rebound followed a weekend pause in military strikes between Washington and Tehran, helping Brent crude fall below $90 a barrel and easing concerns over prolonged disruptions to global energy supplies, CNBC reported.

Falling oil prices improve market sentiment

The decline in crude prices provided immediate relief to equity markets after weeks of volatility fueled by conflict in the Middle East. Lower energy costs eased concerns that renewed inflationary pressure could complicate the Federal Reserve's policy outlook and weigh on corporate earnings.

The improvement in risk appetite extended beyond U.S. futures. European equities opened higher, with Germany's DAX, France's CAC 40, and London's FTSE 100 posting gains. Asian markets also finished broadly higher, led by advances in South Korea's Kospi, Japan's Nikkei 225, and China's CSI 300.

Despite the improved tone, investors remain cautious. Shipping activity through key Middle East energy routes has yet to fully normalize, while geopolitical risks persist following reports of Ukrainian strikes involving Iranian-linked commercial shipping in the Caspian Sea.

Earnings and the Fed take center stage

Attention is quickly turning from geopolitics to corporate fundamentals. This week brings quarterly results from Apple, Microsoft, Amazon, and Meta Platforms, reports that are expected to shape expectations for artificial intelligence spending after Alphabet's recent earnings disappointed investors.

Chipmakers and other AI-related companies remain particularly sensitive to any signs that large technology firms may slow investment. Markets are watching closely for commentary on capital expenditures, cloud infrastructure, and AI monetization.

Investors are also preparing for Wednesday's Federal Reserve meeting. While most economists still expect policymakers to leave rates unchanged this week, futures markets continue to assign meaningful odds to an earlier-than-expected rate increase if inflation risks remain elevated.

A critical week for global markets

This week's combination of geopolitical developments, earnings from the world's largest technology companies, and a closely watched Federal Reserve decision could determine market direction through the remainder of the summer. Falling oil prices have eased immediate inflation concerns, but investors still face uncertainty over monetary policy and whether AI-related spending can continue supporting elevated equity valuations.

As we previously reported, inflation and oil prices widen the split over Fed policy.

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