March 24 (Reuters) - U.S. stock index futures were muted on Tuesday after a relief rally in the previous session, as renewed doubts over easing Middle East tensions weighed on sentiment despite President Donald Trump's decision to delay strikes on Iran's power grid.
Iran launched multiple missiles at Israel on Tuesday, the Israeli military said, despite Trump postponing a threat to bomb Iran's power grid because of "productive talks" with Iranian officials. Tehran has said no negotiations with the U.S. have taken place.
Israeli officials said Trump wants a deal with Iran, but any talks were unlikely to be successful at this point.
Investors took comfort from Trump's comments, sending Wall Street's main indexes rallying to more than 1% on Monday, in their biggest one-day rise since February 6. But the momentum lost steam as uncertainty over the conflict lingered.
"Iranian officials have repeatedly denied that talks with the U.S. were even happening, which contributed to markets reversing some of the initial risk-on reaction late yesterday and overnight," Deutsche Bank analysts led by Jim Reid said.
"Much now depends on the progress of any talks, and whether the more optimistic rhetoric is followed up by concrete action."
At 6:44 a.m. ET, Dow E-minis were down 45 points, or 0.1%, S&P 500 E-minis were down 3 points, or 0.05% and Nasdaq 100 E-minis were up 8.25 points, or 0.03%.
The conflict has driven oil prices sharply higher, reviving inflation jitters and complicating the interest rate outlook for central banks.
The U.S. Federal Reserve struck a hawkish tone last week, projecting only one reduction in 2026.
Money markets are no longer pricing in any rate cuts this year, compared with two reductions expected before the Middle East conflict erupted. Expectations for hikes nudged higher amid escalating tensions last week, but were quickly unwound after Trump's comments on Monday, according to CME's FedWatch Tool.
Last week, all three main U.S. indexes logged their fourth weekly decline, with the Nasdaq marking its biggest weekly drop since early February.
On the data front on Tuesday, investors will watch a flash estimate of S&P Global's gauge of business activity in March, alongside comments from Fed Governor Michael Barr.
Among individual movers, shares of Jefferies (JEF.N), gained 9.8% in premarket trading after the Financial Times reported that Japan's Sumitomo Mitsui Financial Group (8316.T), is working on plans for a possible takeover of the investment bank.
Shares of Smithfield Foods (SFD.O), rose 9% as the U.S. pork processor beat analysts' estimates for fourth-quarter sales and profit.
Dexcom (DXCM.O), gained 3.1% after Evercore ISI upgraded its rating to "outperform" from "in line".
Barclays lifted its 2026 year-end target for the S&P 500 index (.SPX), on Tuesday to 7,650 from 7,400, citing stronger earnings expectations that outweigh macro risks like Middle East tensions, AI-driven disruption and stress in private credit.
Reporting by Purvi Agarwal and Twesha Dikshit in Bengaluru; Editing by Sherry Jacob-Phillips and Maju Samuel
