By Purvi Agarwal and Avinash P
April 20 (Reuters) – U.S. stock index futures inched lower on Monday after a record rally on Wall Street last week, as a rise in tensions between the U.S. and Iran put the ceasefire at risk and weighed on investor sentiment.
Iran opened the Strait of Hormuz on Friday, sparking a buying frenzy across markets, with the S&P 500 and the Nasdaq hitting record highs for the third consecutive session and marking their biggest weekly jumps since May.
However, Tehran closed the waterway again after the U.S. said it had seized an Iranian cargo ship that tried to run its blockade.
Iran’s foreign ministry said on Monday there were no plans for a second round of negotiations with the U.S., as the blockade undermined the talks and differences over Tehran’s nuclear program remained.
Markets have been largely headline-driven since the war, with risk appetite improving at the slightest de-escalation in tensions, and investors turning cautious as soon as the conflict escalates.
Oil prices jumped 5% on Monday, with U.S. energy stocks higher in premarket trading. Exxon Mobil and Chevron gained 1.3% each and Occidental Petroleum added 2%.
“Near-term escalation to gain an upper hand in negotiations cannot be ruled out,” said Mohit Kumar, an economist at Jefferies.
“Our view remains that we are moving towards a deal. We are at a stage where it is not in the interest of either party to carry on with the war. The MAGA base of Trump does not want to continue, and Trump wants a deal. For IRGC (Islamic Revolutionary Guard Corps), the objective is survival.”
At 07:08 a.m. ET, Dow E-minis were down 286 points, or 0.58%, S&P 500 E-minis were down 36.25 points, or 0.51%, and Nasdaq 100 E-minis were down 126 points, or 0.47%.
The CBOE Volatility Index, known as Wall Street’s “fear gauge”, gained after falling for the past eight sessions and was last up 1.99 points at 19.47, a one-week high.
Futures tracking the small-cap Russell 2000 index slipped 1% after the index notched a record high on Friday.
Quarterly earnings will be in focus as investors wait to assess the impact of the Iran war on corporate results and on the broader economy.
Defense giants Lockheed Martin and RTX, alongside tech stocks such as IBM and ServiceNow are scheduled to report later this week. Tesla will kick off results from the so-called “Magnificent Seven” cohort on Wednesday.
Data compiled by LSEG I/B/E/S expects first-quarter earnings from S&P 500 companies to grow 14.4%, compared with 13.7% a year ago.
Among premarket movers, Marvell Technology advanced 7% after The Information reported on Sunday that Alphabet’s Google is in talks with the chipmaker to develop two new chips to run AI models more efficiently.
QXO shares dipped 4.4% after the construction supplies distributor struck a $17 billion deal on Sunday to acquire building products distributor and installer TopBuild, whose shares jumped 18% on Monday.
Psychedelic drug developers gained after U.S. President Donald Trump signed an executive order to speed up reviews and boost federal research funding.
Atai Life Sciences jumped 27.3% before the bell, while Definium Therapeutics added 13.3%, Compass Pathways climbed 25.8% and GH Research gained 18.9%.
(Reporting by Purvi Agarwal and Avinash P in Bengaluru; Editing by Anil D’Silva and Devika Syamnath)
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