US stock futures retreated on Tuesday with investors on edge as Israel and Iran continued to trade strikes against a backdrop of shifting US trade policy and the prospect of stubborn interest rates.
Dow Jones Industrial Average futures (YM=F) sank 0.7%, while those on the S&P 500 (ES=F) fell 0.6%. Contracts on the tech-heavy Nasdaq 100 (NQ=F) also stumbled 0.6%.
Markets are focused on the chances of an end to Israel-Iran hostilities, though Trump’s call for the evacuation of Iran’s capital city and Israel’s pledge to continue attacks have undermined hopes for a swift resolution.
Overall, US stocks have so far proved resilient amid the ramp-up in Middle East tensions. The major gauges fluctuated but ended on a high note on Monday after a report that Iran is seeking a ceasefire and return to negotiations over its nuclear program.
In his latest comments, Trump rejected the idea he exited the G7 summit early to work on a Middle East ceasefire, as stated by France’s President Macron. “He has no idea why I am now on my way to Washington, but it certainly has nothing to do with a Cease Fire. Much bigger than that,” Trump wrote in a social media post early on Tuesday morning.
While Middle East conflict rages, concerns over Trump’s trade policy and the direction of US interest rates lurked in the background.
As the deadline for Trump’s pause on his most sweeping tariffs approaches, his administration is meeting with key trading partners at the G7 summit in Canada in hopes of striking deals. The first completed deal emerged Monday, after Trump and British Prime Minister Keir Starmer said they had signed the trade agreement they had landed on last month.
Read more: The latest on Trump’s tariffs
Even with the tariff pause in place as negotiations take shape, however, Trump’s trade policy has rattled retail sales and consumer confidence. On Tuesday, Investors will get fresh insight into how retail is faring amid tariff uncertainty with the May retail sales report, which is due for release at 8:30 a.m. ET.
Meanwhile, the Federal Reserve is set to issue its next decision on interest rates on Wednesday. A consistent refrain from policymakers this year has been that tariffs represent a stumbling block in terms of issuing interest rate cuts due to the potential for an uptick in inflation. New signs of cooling inflation, consequently, aren’t expected to convince the central bank to change directions; policymakers are expected to hold rates steady Wednesday.
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