Dow Futures experience a slight increase, as the situation in the Middle East fluctuates between heightened conflict and a temporary easing of tensions. U.S. manufacturing data is set to take center stage, accompanied by earnings reports.

Dow futures indicated an upward trajectory on Monday, as investors processed indications of a tentative easing of tensions in the Middle East and geared up for a week rich in corporate earnings reports and significant economic indicators. By 02:00, the Dow futures contract had risen by 277 points, 0.5%, the S&P 500 futures had gained 44 points, or 0.6%, and the Nasdaq 100 futures had increased by 239 points, or 0.8%. The primary indices on Wall Street experienced an uptick in the previous session on Friday, supported by a sustained recovery in technology equities. While some apprehensions persist regarding the viability of substantial investments in artificial intelligence infrastructure by large-cap firms, robust quarterly results from e-commerce leader Amazon have alleviated these concerns. Amazon experienced its most significant quarterly revenue increase in over four years, alongside strong performance from Microsoft, which alleviated concerns stemming from lacklustre announcements from Apple and Meta Platforms last week. The Philadelphia Semiconductor Index, a tracker of the companies making processors crucial for AI systems, also inched up by 0.07%, but remains over 20% below a record high close achieved on June 22. Despite recent turbulence in the AI narrative that may have unsettled traders, John Higgins noted that there remains no definitive evidence suggesting a decline in demand for this emerging technology. “That may help to explain the rebound [late last week] in the share prices of some of the behemoths at the heart of the AI revolution,” Higgins wrote.

Attention is now shifting back to the Middle East, where U.S. President Donald Trump cancelled a planned bombardment of Iran over the weekend, suggesting the potential for a new agreement to reopen the Strait of Hormuz. Thus unfolds what has become an increasingly familiar rhythm of brinkmanship and de-escalation in a conflict initiated by Trump in collaboration with Israel in February. Trump previously abandoned plans for a significant escalation of an American offensive against Iran in late July. Nevertheless, tensions in the Middle East continue to be elevated, with increasing concerns that the conflict could extend to other areas of the region. Trump stated in a social media post that the recent decision to avoid significant military action was influenced by requests from Iran and other Middle Eastern nations. He further noted that the “perimeters” of an agreement to reopen the Strait of Hormuz, a vital waterway that Iran has effectively closed for months, had been established. Media reports from Saudi Arabia indicated that the country’s de facto ruler, Crown Prince Mohammed bin Salman, had encouraged Trump to contemplate the “necessity of prioritizing dialogue” to prevent an escalation of conflict. However, as analysts at Vital Knowledge pointed out, “we’ve been here before.” A framework ceasefire deal signed in June was initially intended to halt hostilities and restore shipping in the Strait of Hormuz; however, it lasted only a few weeks before disintegrating following Iranian strikes on commercial vessels in the narrow passage.

Brent crude futures, the global oil benchmark, experienced a decline of 5.1%, settling at $83.44 per barrel. Imposing additional downward pressure on the contract was a decision by the OPEC+ producer group to modestly increase output by approximately 188,000 barrels per day, a move that completely reverses a 1.65 million bpd reduction implemented in 2023. Last month, Brent experienced a significant increase of 24% following the collapse of the previous U.S.-Iran ceasefire agreement, with analysts forecasting further price escalation in the coming year. Trump has frequently argued that the steep uptick in oil prices is a worthwhile cost of preventing Iran from having a nuclear weapon. However, that position has become increasingly untenable as the White House confronts domestic backlash against an energy-fueled rise in inflation. Addressing these frustrations among voters may gain significance as the U.S. mid-term elections in November draw nearer. Should candidates from Trump’s Republican Party perform poorly in the ballot, the GOP may relinquish control of at least one chamber of Congress.

On the economic calendar, attention will be directed towards factory-gate activity data from the Institute for Supply Management. The tracker of the U.S. manufacturing sector is projected to register at 54.0 in July, an increase from 53.3 in the prior month. A reading above 50 indicates expansion in manufacturing, which constitutes just over 9% of the American economy. In June, the measure exhibited a deceleration, likely attributable to a reduction in order front-loading by businesses keen to mitigate potential supply chain disruptions stemming from the Iran conflict. Nonetheless, the U.S. manufacturing sector has experienced growth for six consecutive months, aided in part by the surge in AI infrastructure investments, which have mitigated the effects of the conflict in the Middle East.

On Monday, the earnings agenda will prominently feature the second-quarter results from Palantir, the data analytics company recognised for its significant investment in AI and its strong connections to U.S. political entities. Runaway demand, driven by U.S. military contracts and a unit providing data analysis software to American firms, led to record quarterly sales of $1.63 billion for the first three months of the year, reflecting an 85% increase compared to the same period last year. Highlighting Palantir’s growing impact in Washington, the group’s Maven AI system, which analyses battlefield data and assists in target identification, is anticipated to be utilised by the American military. In this context, Palantir has indicated that it anticipates fiscal 2026 revenue to fall within the range of $7.65 billion to $7.66 billion. Yet some analysts have indicated that Palantir’s software offerings may face competition from more affordable alternatives created by AI start-ups like Anthropic. Palantir executives expressed strong criticism of what they referred to as “AI slop” for such frontier labs during a call with analysts earlier this year. Shares of the company have declined by over 26% year-to-date.