Markets look past Middle East escalation, for now
United States (US) equity markets surged on Friday, with the S&P 500 and the Nasdaq 100 pushing to fresh record highs, while crude oil finished significantly lower after Iran’s foreign minister declared the Strait of Hormuz completely open for commercial vessels during the Lebanon ceasefire.
However, shortly after markets closed for the weekend, and following a brief flurry of traffic through the Strait of Hormuz, the Islamic Revolutionary Guard Corps (IRGC) announced it was re‑closing the vital waterway as long as the US naval blockade remains in place, reportedly firing on at least two tankers in the process.
Since then, reports have surfaced that the US seized an Iranian cargo ship attempting to breach the blockade, prompting Tehran to vow retaliation. This development has cast fresh doubt over whether the fragile ceasefire, set to last just two more days, will hold at all, placing a heavy shadow over peace talks scheduled to be held in Pakistan early this week.
Against this tense backdrop, West Texas Intermediate (WTI) crude oil futures are trading 4.24% higher at $87.52 a barrel, while Nasdaq futures are trading just 0.50% lower at 26,692 during Asian trading.
These relatively modest moves at the start of what appears to be a critical week highlight a sense of Middle East headline fatigue among traders. Markets are, as we noted last week, forward‑looking by nature and increasingly expect the deadline to be extended once again, while peace talks and diplomatic pressure continue behind the scenes to break the stalemate.
Geopolitics dominates as earnings and data take a back seat
Looking ahead, all eyes this week will remain on headlines from the Middle East ahead of the expiry of the 22 April ceasefire. Away from geopolitical developments, the US corporate earnings season rolls on, featuring reports from 3M, GE, Tesla, IBM, Boeing, Intel, Procter & Gamble, United Airlines and many more.
On the economic front, the main points of interest will be US retail sales figures for March and the April flash purchasing managers’ index (PMI) discussed below.
S&P Global Flash PMI
Date: Thursday, 23 April at 11.45pm BST
For March, the S&P Global US composite flash PMI slipped to 50.3, its lowest level in nearly a year. The details revealed a clear divergence between sectors. The services PMI fell to 49.8, slipping into contraction territory for the first time in three years. Firms cited the weakest growth in new business since April 2024, partly attributed to tariffs and the ongoing conflict in the Middle East.
In contrast, the manufacturing PMI rose to 52.3, marking an eighth consecutive month of expansion. Stronger output and new orders were supported by businesses stockpiling supplies and locking in prices amid the Middle East conflict.
The April flash figures will offer an early snapshot of how the US economy is navigating ongoing geopolitical uncertainty, elevated oil prices and shifting trade dynamics.
Consensus expectations point to a modest rise in the composite measure. However, any further slowdown, especially in services, could heighten concerns about stagflation risks and complicate the Federal Reserve (Fed) policy balancing act. Stronger‑than‑expected readings, by contrast, would support risk sentiment and reinforce the view of an incredibly resilient US economy.
The US interest rate market starts the week pricing in 16 basis points (bp) of Fed rate cuts for this year.