Fragile U.S.-Iran ceasefire tensions, stalled Hormuz oil flows, and upcoming economic data could weigh on markets, pulling the S&P 500 futures lower after a strong rally driven by initial geopolitical optimism.
Wednesday’s relief rally that took the major U.S. stock market gauges to nearly a month’s highs faces a test as the fragile ceasefire agreement risks falling apart. The U.S. and Iran contended about whether Lebanon, which is home to the pro-Iranian Hezbollah military outfit, is part of the agreement.
Ceasefire Under Strain: Iranian Foreign Ministry Spokesperson Esmaeil Baqaei called out the U.S. for its early reneging on the deal. The country’s Foreign Minister Seyed Abbas Araghchi took a potshot at the U.S. for the violation. “The Iran–U.S. Ceasefire terms are clear and explicit: the U.S. must choose—ceasefire or continued war via Israel. It cannot have both.”
Speaker of the Iranian Parliament MB Ghalibaf issued a statement, condemning the U.S. for violating three clauses of the agreement: not declaring a ceasefire in Lebanon, the entry of an intruding drone into Iranian airspace and denying the country’s right to enrichment. “In such a situation, a bilateral ceasefire or negotiations is unreasonable,” he said.
A social media post by U.S. President Donald Trump further questioned the strength of the two-week ceasefire that is currently in force as a prelude to a final framework agreement. The president suggested that all U.S. personnel, ammunition and weaponry will stay in place around Iran until a final agreement is reached.
Hormuz Optimism Fades: With a ceasefire in doubt, oil tanker traffic through the Strait of Hormuz, a key chokepoint in the region, remains halted. ING Commodities Strategists Ewa Manthey and Warren Patterson said, “With a full reopening of the strait unlikely in the near term, oil prices are expected to remain supported, as disruptions linked to reduced output and refinery shutdowns will take time to unwind.”
Futures Pull Back: The S&P 500 E-mini futures contract, which rallied 2.5% on Wednesday, buoyed by the ceasefire deal, has pulled back since. Wednesday’s rally took the ES contract past the 6,800 level to its highest level in nearly a month.
The futures contract is down more than 0.30% early Thursday.
ES Contract (YTD Chart)
Source: TradingView
The apprehension also traces back to a slew of key economic data due for the day, including the weekly jobless claims, the final fourth-quarter GDP report and the February personal consumption expenditure (PCE) index, released as part of the personal income and spending report.