US stock futures slipped Tuesday pausing after a sharp rebound on Wall Street that was driven by growing optimism around a potential easing of tensions between Washington and Tehran.

Contracts linked to the S&P 500 (ES=F) fell 0.2%, the Dow Jones Industrial Average (YM=F) dropped 0.3%. While the Nasdaq 100 futures (NQ=F) slipped 0.2%.

Oil prices retreated sharply on the news of hostilities potentially winding down, but then rebounded as fighting between Iran and the US-Israeli alliance continued. West Texas Intermediate (CL=F) crude rose 3% to settle near $91 per barrel, while Brent (BZ=F) crude edged higher by 2%, ending just under $100. Oil futures rose slightly in late trading.

Markets rose Monday after President Trump said the US had engaged in “very good and productive” discussions with Iran aimed at resolving hostilities. However, Iranian state media pushed back on the claim, stating that no direct negotiations had taken place. Markets initially reacted enthusiastically, with the Dow (^DJI) at one point soaring more than 1,100 points intraday.

The developments followed a tense weekend, during which Trump warned of potential strikes on Iranian energy infrastructure if the Strait of Hormuz was not opened. Iran responded with threats targeting US assets, raising concerns about further escalation.

Looking forward, investors will turn their attention to upcoming US manufacturing data due Tuesday morning, as well as eyeing the end of earnings season, with GameStop (GME) due to report after the close.

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