U.S. stock index futures moved higher Wednesday as market participants weighed fresh indications that a path toward a halt in fighting involving Iran may be under discussion. The session followed a string of volatile trading days in which investors grappled with inconsistent information from the Middle East.
At 09:10 ET (13:10 GMT), futures tied to major U.S. benchmarks showed notable gains: Dow Jones Futures were up 1%, S&P 500 futures climbed 0.9%, and Nasdaq 100 futures rose 1.1%.
"Markets continue to gyrate around the latest Iran headlines, with softness earlier yesterday amid doubts on the status of any negotiations between the U.S. and Iran giving way to more optimism late in the U.S. session and into Asia this morning," said Jim Reid of Deutsche Bank.
Focus on a possible ceasefire
All three major U.S. averages had recorded declines in the previous session as investors tried to assess how likely it is that the fighting involving joint U.S.-Israeli forces and Iran will stop. Fighting has persisted, and the United States has begun to deploy additional military units to the region. At the same time, some U.S. allies in the Persian Gulf have reportedly urged President Donald Trump to continue military actions.
Tuesday's session was volatile in large part because of conflicting reports. President Trump indicated that talks with Iran were ongoing, but Tehran repeatedly denied the existence of such negotiations, a dynamic that dented market confidence. Iran accused the president of using suggestions of talks to calm volatile markets.
Sentiment improved significantly in extended trading after Israeli Channel 12 reported that U.S. Middle East Special Envoy Steve Witkoff and businessman Jared Kushner were working on a mechanism to implement a ceasefire and permit the U.S. and Iran to negotiate a 15-point plan. That reporting was later echoed by Axios and the New York Times.
The reported U.S. demands include the dismantling of Iran's principal nuclear sites and the reopening of the Strait of Hormuz - the critical shipping lane south of Iran that has been effectively closed to tanker traffic for weeks. The strait's closure has pushed energy prices higher, raising concerns about inflationary pressure in economies worldwide.
The Wall Street Journal reported overnight that Iran was setting steep terms for any ceasefire discussions, including calls for the removal of all American bases in the Gulf and establishing fees for ships passing through the strait.
On Wednesday morning, the Fars News Agency reported that Iran does not accept the ceasefire proposal, and that Tehran is seeking a full end to the war rather than merely a ceasefire.
Market and macro ripples
Despite the muddled messaging around talks and demands, oil prices eased. Brent crude futures for May delivery were last down 4.7% at $99.58 a barrel. That retreat brought the contract back below the psychologically important $100-per-barrel level, though prices remain substantially above the roughly $70-per-barrel level seen before the outbreak of the conflict in late February.
Traders have voiced concerns about the potential economic fallout from a protracted war. Those worries were reflected in preliminary U.S. business activity data for March, where S&P Global's flash purchasing managers index fell to an eleven-month low and signaled mounting pressure on growth driven in part by rising prices related to energy shocks from the conflict.
The stress is not limited to the United States. Separate purchasing managers readings for the Eurozone were described as sounding "ringing stagflation alarm bells," underscoring the risk of stubborn inflation alongside stagnant growth in that region.
Corporate movers in premarket trading
On the corporate front, Merck (NYSE:MRK) said it will acquire oncology-focused Terns Pharmaceuticals (NASDAQ:TERN) in a cash deal that values Terns at $53 per share and about $6.7 billion on an equity basis. Terns' stock rose more than 5% in premarket trading following the announcement. The acquisition is intended to add Terns' lead candidate, which is in early- to mid-stage development for chronic myeloid leukemia, to Merck's oncology pipeline.
Chewy surged by more than 10% after the online pet supplies retailer posted fourth-quarter adjusted earnings that significantly beat analyst expectations.
Shares of EchoStar, Rocket Lab, and AST SpaceMobile climbed in premarket trade after The Information reported that Elon Musk's SpaceX plans to file a prospectus for a widely anticipated initial public offering as soon as this week.
Investor takeaway
Markets are reacting in real time to a mix of geopolitical headlines, energy-price movements and corporate activity. The back-and-forth nature of reporting from the Middle East has injected volatility into trading, with oil prices and business activity indicators highlighting the channels through which conflict can influence inflation and growth. Meanwhile, merger and earnings news continues to move individual equities in premarket trading.