Iran Oil Shock, Fed Rate Uncertainty, and AI Earnings in Focus Before Market Open

New York, May 26, 2026, 03:10 EDT

• U.S. markets reopened following the Memorial Day holiday. S&P 500 and Nasdaq futures edged up, but early gains faded.
• Oil is back in focus as new U.S. strikes in Iran take down hopes for any quick peace deal.
• Markets are waiting for consumer confidence numbers Tuesday. The Fed’s preferred inflation gauge, PCE, is coming Thursday.

U.S. stock futures edged higher in early Tuesday trading, but the gains looked shaky with oil spiking after new U.S. strikes in southern Iran took the air out of hopes for a peace agreement. Nasdaq futures tacked on 0.86%, S&P 500 futures added 0.66%, and Brent crude jumped over 2% to $98.21 a barrel, Reuters said.

Timing is a factor. Wall Street returns after Monday’s Memorial Day break. Both the NYSE and Nasdaq list May 25 as a market holiday in 2026. Investors have a shortened week packed with macro data, earnings, and Middle East headlines.

The risk isn’t just geopolitical now. Higher oil prices push up gasoline and transport costs, which could keep inflation stubborn and force the Federal Reserve to hold off or even scrap the rate cuts traders have counted on. That leaves companies facing pricier borrowing and less room for stock valuations to move higher.

Traders are tracking the Strait of Hormuz, where oil flows have faced disruption since the conflict started. Joseph Capurso, strategist at Commonwealth Bank of Australia, told Reuters he was “a bit sceptical” about any prospect of peace soon. “There’s a lot we don’t know,” he said. Reuters

Bond yields fell a bit, but warning signs from the market are still out there. The two-year Treasury yield lost almost 7 basis points to 4.0573%, and the 10-year slid more than 6 basis points to 4.5083%. One basis point is equal to one-hundredth of a percent. Eric Robertsen, who is head of global research and chief strategist at Standard Chartered, said inflation and fiscal risks were “likely to be more sustained.” Reuters

Gold slipped instead of rising as a haven. Spot gold dropped 0.9% to $4,529.50 an ounce, with traders looking for higher-for-longer rates, Reuters said. Kelvin Wong, senior market analyst at OANDA, said there were “very high odds” the U.S. would hike rates this year. Reuters

Consumer confidence numbers hit at 10 a.m. ET, with the Conference Board set to release its latest index. Reuters’ Morning Bid says expectations are for a slight drop to 92 in May as higher gas prices pinch households. The consumer confidence index measures how upbeat people are about jobs, pay, and the economy.

PCE inflation data for April lands on Thursday, the key number for the Fed since it follows the goods and services consumers buy and shifts in spending. The Bureau of Economic Analysis has the next PCE report down for May 28.

Stocks stayed firm. Reuters data showed the S&P 500 finished Friday at 7,473.47, up 0.37%. The Dow closed at 50,579.70 for a 0.58% gain, while the Nasdaq was up 0.19% at 26,343.97.

Hedge fund tech bets are near record highs, Goldman Sachs said, with positioning crowded in the trade that’s pushed the market. Hedge funds scooped up technology stocks last week at the fastest clip since February, according to a Goldman note cited by Reuters, and their global information-technology positions are hovering just under records from 2016.

This week’s earnings are up next. Reports from Salesforce, Dell Technologies, Costco, Best Buy and Dollar Tree are expected, according to Reuters. Dell and Salesforce earnings will give another look at the AI-spending trend, while the retailers could show how much high fuel prices are hurting consumers. Nvidia’s second-quarter revenue forecast of $91 billion, which beat Wall Street estimates, is still the main marker for AI demand.

“Investors are moving beyond the earnings season, and the macro environment is starting to take more center stage,” Anthony Saglimbene, chief market strategist at Ameriprise, told Reuters. Jim Baird at Plante Moran Financial Advisors said it plainly: “Inflation concerns continue to flare.” Reuters

UBS Global Wealth Management boosted its S&P 500 target for year-end 2026 to 7,900, up from 7,500. The bank pointed to steady consumer spending and ongoing demand for data-center infrastructure. UBS strategists said the “bull market drivers remain intact,” but flagged that sectors linked to oil and rates could be at risk if there is no resolution in Hormuz. Reuters

Big “but”: A peace headline might hit oil and boost risk-on trades, but any delay, escalation, or an upside inflation surprise could bring rate-hike bets back. Nomura dropped its 2026 Fed cut call. Futures markets showed about a 58% chance of a Fed hike by year-end, Reuters reported. Reuters

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