Dow futures jump over 300 points on hopes of US-Iran deal

US stock futures rallied on Tuesday as investors bet diplomatic efforts between Washington and Tehran could prevent a broader escalation in the Middle East despite fresh military action.

Dow futures rose more than 300 points, or 0.6%, while S&P 500 futures gained 0.7% and Nasdaq-100 futures advanced 1%. US markets were closed on Monday for the Memorial Day holiday.

Investor sentiment was supported by comments from US President Donald Trump, who said talks with Iran to end the conflict were "proceeding nicely." However, Trump warned that the United States could take further action if negotiations fail.

The gains came even after the US carried out what it described as "self-defense" strikes in southern Iran early Tuesday, targeting missile launch sites and Iranian vessels allegedly attempting to deploy naval mines.

Oil retreats, supports equities

Oil prices eased from recent highs, helping support risk sentiment. US crude futures were down about 4%, while Brent crude traded near $98 a barrel.

Markets remain sensitive to developments around the Strait of Hormuz, a key route for global oil supplies. However, traders appear to be betting that a wider regional conflict can be avoided.

Space stocks gain

Shares of rocket and satellite companies extended gains in premarket trading after SpaceX publicly filed for what could become the largest-ever initial public offering.

Among movers, shares of Redwire Corporation rose 15%, MDA Space gained 13%, and Firefly Aerospace advanced 11%.

Fed outlook in focus

Investors are also monitoring the outlook for monetary policy. While oil prices have eased, crude remains elevated compared with levels seen earlier this year, keeping inflation concerns alive.

As a result, traders expect the Federal Reserve to remain cautious on interest-rate cuts, particularly if energy-driven price pressures persist.