On Monday evening, stock futures experienced a decline as investors remained cautious while closely monitoring the escalating conflict between Israel and Iran. Specifically, futures linked to the Dow Jones Industrial Average fell by 85 points, translating to a 0.2% decrease. Similarly, S&P 500 futures also dipped by 0.2%, while Nasdaq 100 futures saw a more significant decline of nearly 0.3%.
Despite the evening's downturn, the three major stock averages concluded Monday's regular trading session on a positive trajectory. The Dow Jones gained over 300 points, reflecting a robust performance. The S&P 500 recorded an approximate advance of 0.9%, while the Nasdaq Composite surged by 1.5%. This positive investor sentiment was largely supported by a notable decrease in oil prices, with Brent crude and West Texas Intermediate crude futures settling down more than 1%.
This shift in oil prices marked a stark contrast to the sharp rally experienced on Friday, which was triggered by Israel's airstrikes against Iran. As the conflict entered its fourth day on Monday, reports emerged indicating that Iran had reached out to several nations, including Saudi Arabia and Qatar, requesting their assistance in urging U.S. President Donald Trump to apply pressure on Israel for a ceasefire. A Middle East diplomat, who spoke to NBC News, suggested that Iran's willingness to negotiate a ceasefire could hinge on its flexibility regarding nuclear discussions.
In a significant turn of events on Monday evening, President Trump took to Truth Social to advise an immediate evacuation of Tehran, which contributed to a slight decline in U.S. stock futures. Following this announcement, West Texas Intermediate crude futures experienced a 1% increase in overnight trading.
Israel's immediate goal is to neutralize the Iranian nuclear threat. However, experts, including Jeff Buchbinder, chief equity strategist at LPL Financial, suggest that achieving long-term regime change may prove more challenging. Buchbinder noted that while each conflict has its unique characteristics, historical analysis of 25 geopolitical shocks since the Pearl Harbor attack in 1941 indicates that stocks generally exhibit resilience in such scenarios. On average, total drawdowns during these events have been around 4.6%, typically over a span of 19 days.
Furthermore, recoveries to pre-event levels have historically taken longer, averaging about 40 days. Nevertheless, Buchbinder emphasizes that these interruptions usually last only a few weeks to a couple of months, indicating potential stability in the market amid ongoing geopolitical tensions.
