S&P 500 Forecast: SPX slips as geopolitical tensions escalate

US futures

Dow futures 0.03% at 42,176

S&P futures 0.08% at 5969

Nasdaq futures 0.08% at 21645

In Europe

FTSE -0.23% at 8754

DAX -0.5% at 23210

• US stocks slip as the market awaits Iran’s response
• US PMI data is due later
• Defence & oil stocks rise, travel stocks fall
• Oil sees heightened volatility

Iran’s response is awaited

U.S. stocks are pointing to a weaker open on Monday as Iran vowed to retaliate for the US air strikes on its nuclear facilities over the weekend.

The market reaction has so far been fairly muted as investors wait to see how Iran will retaliate. Oil prices are seeing volatility rising briefly to a fresh 5-month high.

The markets also grapple with ongoing price pressures from President Trump's tariffs. Volatility in the oil price could add a new layer of inflationary concerns. The 90-day pause on Trump's reciprocal trade tariffs is due to expire on July 8. Trump warned earlier this month that letters would go out to trading partners to advise them of new tariff levels.

CPI inflation data has so far failed to show the expected uptick in inflation caused by tariffs, which Fed President Jerome Powell warned about last week. On Friday, attention will be paid to core PCE data to see if there are any signs that inflation is heating up.

Looking ahead to this afternoon, US PMI figures will be in focus—the services PMI is expected to ease to 52.9, down from 53. The manufacturing PMI is also expected to slow to 51 from 52. Weaker-than-forecast data could raise concerns over the health of the US economy as trade tariff uncertainty bites.

Corporate news

Oil stocks such as Exxon Mobil and Chevron are expected to open higher, tracking oil prices. Well, the tension is straight off home as the market awaits Iran's response to the US attacks over the weekend.

Defence stocks are also rising, with Lockheed Martin and RTX gaining 1.1%.

Tesla rises after the group launches its driverless taxi service for some riders.

Circle has surged more than 5%, boosted by the US Senate passing stablecoin measures last week, and what is being labelled A watershed moment for the crypto industry. The circle share price jumped 80% last week.

S&P 500 forecast – technical analysis.

The S&P500 ran into resistance at 6069 and eased lower, and is consolidating below the 6000 level, testing the 20 SMA. While the price shows signs of momentum slowing, there are no concrete signs of a reversal. Should the price break below 5920 minor support, this brings 5850 into focus and the 200 SMA at 5825. Should the 20 SMA support hold, buyers will look to rise above the 6000 psychological level. A rise above 6070 creates a higher high, bringing the record 6100 into focus.

FX markets – USD rises, EUR/USD falls

The USD is rising on Monday, extending gains from last week as it proves to be the safe haven of choice amid the Middle East escalation. The USD will look to US PMI data for further clues.

The EUR/USD is falling after PMI data pointed to a stagnant economy. The Eurozone composite PMI remained unchanged at 50.2, defying expectations for a rise to 50.5. The manufacturing PMI was also weaker than forecast, at 49.4, and was in contraction territory.

GBP/USD is falling, dropping to a 5-week low amid a stronger U.S. dollar, despite UK PMI data coming in stronger than expected. The composite PMI rose to 50.7, up from 50.3, while the June services PMI rose to 50.3, which is in line with expectations and up from 50.9. The data suggests the economy remains resilient in May, improving after the US trade deal.

Oil is volatile after the US attack on Iran.

Oil is edging higher on Monday in choppy trade after the US joined Israel in attacking Iran's nuclear facilities over the weekend, leaving investors weighing up the potential risks to oil supply.

The market is waiting for Iran's response, with attention firmly on the Strait of Hormuz. Whilst the Iranian parliament has agreed to block the Strait, the final decision lies with the Supreme National Council. Should this key checkpoint be blocked, oil prices could jump quickly. However, it's worth noting that these straight of homies is also indispensable for Iran's own oil exports, so a sustained closure would be shooting itself in the foot.

Prices have been volatile with WTI rising to a fresh 5-month high earlier in the session of 7840, before easing lower to 74.25, given that there has been no direct impact to supply so far.