S&P500 Forecast: SPX falls as higher oil prices & treasury yields drag

US futures                                          

Dow futures -0.36%, S&P futures -0.22%  & Nasdaq futures -0.14%

In Europe                                                                        

FTSE 0.67% & DAX 0.68%

• U.S stocks fall, extending losses from Friday.
• Treasury yields rise with the 10-year yield at a 12-month high
• Ond rout overshadows recent AI euphoria
• Oil rises as US-Iran tensions rise

US stocks fall as inflation fears overshadow AI optimism

US stock futures pointed lower on Monday, although contracts pared earlier declines as investors weighed the inflationary impact of surging oil prices and rising bond yields.

Crude extended last week’s 10% rally amid escalating tensions in the Middle East. President Trump warned Iran that time was running out for progress in nuclear talks, while reports suggested the US and Israel were considering renewed military action should negotiations fail. Year-end oil futures climbed above $92 a barrel, the highest level since the conflict began, reinforcing concerns over supply disruption.

The rise in energy prices is feeding into broader inflation fears and driving a renewed selloff across global bond markets. The US 10-year Treasury yield climbed to its highest level in more than a year, while the 30-year yield traded at levels last seen before the 2007 financial crisis. In Japan, 30-year government bond yields hit record highs, fuelling concerns over a potential unwind of the yen-funded carry trade as domestic investors repatriate capital.

The move higher in yields is challenging the AI-led rally that has powered equities to record highs in recent months. While investors initially looked through the oil shock, Friday’s sharp equity selloff suggests markets are becoming increasingly sensitive to the risk of persistently higher inflation and interest rates.

This week's focus will centre on NVIDIA earnings on Wednesday, seen as a key test for the durability of the AI-driven equity rally. Retail earnings, including Walmart's results, are also expected to provide insight into the resilience of the US consumer.

Corporate movers

Arm Holdings fell 1% in premarket trading after reports that the US Federal Trade Commission is investigating whether the company monopolised parts of the semiconductor market.

Macy's rose more than 5% after filings showed Berkshire Hathaway disclosed a roughly $55 million stake in the retailer at the end of the first quarter.

Delta Air Lines gained over 1% after regulatory filings showed Berkshire Hathaway had built a $2.6 billion position in the carrier.

S&P 500 – Technical analysis

The S&P 500 eased back after reaching a record high of 7,515, with momentum cooling as the RSI moved out of overbought territory. However, the broader uptrend remains intact while the index holds above key moving averages.

A break above 7,515 would bring 7,600 into focus, while support is seen around 7,340 and the 20-day moving average near 7,270. A move below 7,000 would be needed to threaten the longer-term bullish structure.

FX markets – USD slips, GBP/USD rises

The U.S. dollar is modestly softer on Monday but remains close to last week’s highs after hotter-than-expected U.S. inflation data and rising geopolitical tensions pushed global bond yields higher. Expectations that the Federal Reserve may still hike rates again this year continue to support the greenback.

EUR/USD is edging higher towards 1.1650 amid some dollar weakness, although gains may remain limited given the cautious risk backdrop and higher oil prices. Attention will turn to Eurozone PMI data on Thursday after business activity contracted in April.

GBP/USD is recovering towards 1.3350 after falling to a near six-week low last week. However, gains may be constrained by ongoing UK political uncertainty as several Labour Party figures emerge as potential successors to Prime Minister Keir Starmer. Investors remain cautious over the prospect of increased fiscal spending and the risk of renewed pressure on UK public finances.

Oil rises as supply worries intensify

Oil prices are rising on Monday, extending last week’s 10% gain as geopolitical risk premiums continue to build into the market.

President Trump warned Iran that the clock is ticking and that there would be “nothing left” if progress is not made in stalled U.S.-Iran talks. Reports that Israel and the U.S. are advancing military preparations for potential renewed strikes on Iran have further increased fears of a broader Middle East escalation, supporting crude prices.

Negotiations between Washington and Tehran remain deadlocked over Iran’s nuclear programme, reducing expectations for a near-term diplomatic breakthrough. As a result, traders are increasingly focusing on the risk of prolonged supply disruption rather than de-escalation.

The Strait of Hormuz remains effectively closed, raising concerns over global energy flows, while inventories are being drawn down at the fastest pace outside major crisis periods. This combination of supply fears and rising geopolitical uncertainty continues to underpin the rally in oil prices.