Dow Jones futures gain despite market caution after US strike on Iran

Dow Jones futures advance 0.53% above 50,900 during European hours ahead of the US regular opening on Tuesday. Meanwhile, the S&P 500 rise 0.54% toward 7,550, and the Nasdaq 100 futures gain 0.73% above 29,750.

US stock futures rise despite market caution after the United States (US) forces conducted self-defense strikes in southern Iran on Monday, targeting missile launch sites and Iranian vessels attempting to deploy mines. While the US military emphasized its commitment to protecting its forces, it maintained that it was still exercising restraint during the ceasefire.

US President Donald Trump cautioned that a collapse in talks could trigger fresh military attacks, even as a Pakistani mediator reportedly informed China that an agreement was close. However, traders track diplomatic progress on a potential peace agreement between the United States (US) and Iran. Bloomberg reported on Monday that President Trump stated negotiations toward a deal to end the conflict and reopen the Strait of Hormuz were "proceeding nicely.”

Traders may adopt caution due to fears of an energy-driven inflation shock, strengthened expectations that the Federal Reserve (Fed) may tighten monetary policy. According to the CME FedWatch tool, market participants are now pricing in a nearly 41.0% probability that the Fed will implement a 25-basis-point interest rate increase by the end of the year. Market attention is now turning toward the upcoming PCE inflation data for clearer signals on the Fed’s future policy path.