U.S. stocks rise despite Israel-Iran tensions; Fed meeting looms
Peter Nurse

Investing.com--U.S. stocks rose Monday, recovering some ground ahead of a Federal Reserve interest rate decision later in the week despite elevated geopolitical tensions. 

At 09:32 ET (13:32 GMT), the Dow Jones Industrial Average rose 205 points, or 0.5%, the S&P 500 gained 40 points, or 0.7%, and the NASDAQ Composite climbed 190 points, or 1%.

The main averages on Wall Street sank on Friday, with the DJIA dropping over 700 points, following a series of airstrikes between Israel and Iran, raising tensions in the Middle East and denting market sentiment.  

Iran-Israel conflict escalates

Israel and Iran continued to exchange missile strikes over the weekend, and into Monday, ramping up the geopolitical uncertainty in the Middle East.

Tehran has told mediators Oman and Qatar that it will not engage in ceasefire talks helmed by the U.S. while Israel is carrying out its strikes, Reuters has reported, citing an official briefed on the matter.

Israel, meanwhile, has warned Iranians living near nuclear facilities to evacuate. The country targeted these locations and other ballistic missile programs in a wave of attacks first launched early on Friday.

However, the conflict does not look like it is spreading wider, so far, and crucially, investors seem to be assuming Iran will not threaten to close the Strait of Hormuz to global shipping. 

Fed meeting awaited for more rate cues

The Federal Reserve is set to kick off a two-day meeting from Tuesday, and is widely expected to keep interest rates unchanged, around 4.5%, at the end of the meeting on Wednesday. 

But focus will be largely on whether the central bank will signal future rate cuts, especially in the face of softer U.S. inflation and signs of a cooling economy. 

The central bank has so far largely maintained its stance that interest rates will remain unchanged in the near-term. But soft inflation data in recent months, coupled with signs of a cooling labor market and dwindling economic growth spurred bets that the Fed could change its tone in the coming months.

The Fed is also facing increasing pressure from President Donald Trump to cut interest rates. 

The central bank had cut rates by a total of 1% in 2024, but forecast a much slower pace of cuts in 2025 due to uncertainty over inflation and the economy. A bulk of this uncertainty stemmed from Trump’s trade tariffs and their potential impact. 

Investors will also monitor manufacturing survey data due later Monday. 

G7 summit in focus

The leaders from the Group of Seven nations are meeting in Canada this week, in what could be a fraught occasion given U.S. President Donald Trump have levied punishing tariffs on the imports from many of his allies.  .

Canadian Prime Minister Mark Carney has stressed that the summit will push for peace and security, although he has suggested that Ottawa could hit back at the U.S. if the White House does not lift its tariffs on steel and aluminum.

Roku gains on Amazon tie-up

In corporate news, Roku (NASDAQ:ROKU) stock rose strongly after the company announced an exclusive partnership with Amazon (NASDAQ:AMZN) Ads, creating what the firms describe as the “largest authenticated Connected TV (CTV) footprint in the U.S.

United States Steel (NYSE:X) stock surged after U.S. President Donald Trump approved the partnership between the steelmaker and Japan’s Nippon Steel, while Sarepta Therapeutics (NASDAQ:SRPT) slumped after the company disclosed a second case of patient death due to acute liver failure after receiving its gene therapy for a rare form of muscular dystrophy.

Volatile crude trading 

Oil prices fell Monday, handing back earlier gains as traders digested the ongoing conflict between Israel and Iran.

By 09:32 ET, Brent crude futures dropped by 1.4% to $73.19 per barrel, while U.S. West Texas Intermediate crude futures fell 1.3% to $70.37 a barrel. Both of the contracts had soared by over $4 earlier in the session.

Israel and Iran exchanged fresh strikes over the weekend that killed and wounded civilians, and threatened to send the Middle East spiralling into a broader regional conflict.

Ambar Warrick contributed to this article 

Peter Nurse is a financial journalist and editor based in London. He joined the Investing.com news team in January 2020. 

Peter has more than 20 years experience covering European equity markets, foreign exchange and commodities. 

Former employers include Dow Jones Newswires, the Wall Street Journal and Knight Ridder. 

 

 

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