March 31 (Reuters) - U.S. stock index futures gained on Tuesday, as markets welcomed a report signaling potential de-escalation in the Middle East conflict that has set the S&P 500 and the Dow on course for their biggest monthly decline in years.
The Wall Street Journal reported on Monday U.S. President Donald Trump told aides he was willing to end the military campaign against Iran even if the Strait of Hormuz remained largely closed.
The report soothed some investor nerves after a month-long conflict that has battered global markets and left the S&P 500 and the Dow on track for their largest monthly falls since September 2022. The benchmark S&P 500 was also headed for its worst quarter since 2022.
Oil prices were volatile on Tuesday, but were headed for a record monthly gain. The S&P 500 energy index (.SPNY), has gained more than 11% so far in March, the only sector set to end the month in positive territory.
Last week, the Dow and the Nasdaq ended 10% below their record high closes, confirming a correction. The small-cap Russell 2000 (.RUT), confirmed it earlier this month.
"If the disruption persists, feeding through into higher costs, tighter financial conditions, and weaker growth, the market risks transitioning from a technical reset into a more prolonged adjustment," said Tom Nelson, head of market strategy at Franklin Templeton Investment Solutions.
At 06:54 a.m. ET, Dow E-minis were up 333 points, or 0.73%, S&P 500 E-minis were up 43.25 points, or 0.68%, and Nasdaq 100 E-minis were up 129.75 points, or 0.56%.
Investors will also watch out for the job openings and labor turnover survey (JOLTS) data for February, the first of the labor market reports due in the holiday-shortened week.
Comments from Fed policymakers, including Austan Goolsbee and Michelle Bowman, will also be parsed for any clues on the Federal Reserve's monetary policy path after Chair Jerome Powell said on Monday the Fed can wait to assess the impact from the war.
The oil spike stemming from the Iran conflict has revived inflation worries, prompting money market participants to price out any easing from the Fed this year, compared with two cuts expected before the war broke out, per CME Group's FedWatch Tool.
Isabella Mateos Y Lago, an economist at BNP Paribas, said investors were not expecting the war to cause meaningful damage to growth, with many analysts sticking to their pre-war end-2026 U.S. index targets, and making little downgrades to earnings forecasts, as cash holdings remained below Trump's tariff announcement levels.
Among premarket movers, McCormick (MKC.N), shares gained 4.8% after Unilever (ULVR.L), said it was in advanced talks to combine its food business with the spice maker.
Constellation Energy (CEG.O), dipped 1.9% after forecasting 2026 profit below Wall Street expectations.
Reporting by Purvi Agarwal and Twesha Dikshit in Bengaluru; Editing by Shinjini Ganguli and Devika Syamnath
