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U.S. stock index futures dropped sharply on Monday as escalating conflict in the Middle East pushed oil prices well above $100 a barrel, raising fears that higher energy costs could weigh heavily on the U.S. economy.
By 06:15 ET (10:15 GMT), Dow Jones Futures fell more than 540 points, or 1.1%, while S&P 500 Futures declined 70 points, or 1%, and Nasdaq 100 Futures dropped 270 points, or 1.1%.
The weakness followed a negative week on Wall Street, where all three major indices ended with losses of at least 1% as intensifying fighting in the Middle East fueled concerns about global economic stability.
Oil surge fuels inflation fears
Markets were rattled after crude oil prices spiked sharply following an escalation in the conflict involving the United States, Israel, and Iran over the weekend.
U.S. benchmark West Texas Intermediate crude surged close to $120 per barrel, as traders grew increasingly worried about potential supply disruptions and risks to tanker traffic through the Strait of Hormuz, one of the world’s most important oil transit routes.
The surge in energy prices has heightened concerns that a new energy shock could push inflation higher and reduce consumer spending in the United States, potentially slowing economic growth.
A prolonged rally in crude could also complicate the Federal Reserve’s monetary policy outlook, as elevated energy costs may keep inflation pressures high even as other parts of the economy begin to cool.
IMF warns of inflation impact
International Monetary Fund Managing Director Kristalina Georgieva warned that rising oil prices could have significant consequences for global inflation.
Speaking at an event in Japan, Georgieva said that a sustained 10% increase in oil prices could raise global headline inflation by around 0.4 percentage points.
“Think of the unthinkable and prepare for it,” she said, highlighting the risks posed by geopolitical tensions.
Her remarks follow the release of a weaker-than-expected U.S. nonfarm payrolls report for February, which raised fresh concerns about the strength of the American labor market.
Key U.S. inflation data ahead
While Monday’s economic calendar is relatively light, investors are looking ahead to several important data releases later in the week.
The U.S. consumer price index (CPI) report is scheduled for Wednesday, offering a key gauge of inflation trends. On Friday, markets will also receive the personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation measure, along with new data on job openings.
These indicators could play a crucial role in shaping expectations for future interest rate policy.
Leadership change in Iran adds to uncertainty
Geopolitical tensions remain high after Iran named Mojtaba Khamenei as the country’s new Supreme Leader following the assassination of his father, Ali Khamenei.
Mojtaba Khamenei, widely viewed as a hardliner, is expected to maintain a confrontational stance toward Western countries. U.S. President Donald Trump has described his leadership as “unacceptable.”
Trump also commented Sunday that the rise in oil prices was an acceptable consequence of military action against Iran’s nuclear program, even as higher fuel costs begin to filter through to U.S. gasoline prices.
Corporate developments in focus
On the corporate front, Hewlett Packard Enterprise is scheduled to report its latest quarterly earnings after the market closes Monday.
Later in the week, investors will also watch results from Kohl’s, Oracle, Dollar General, and Dick’s Sporting Goods.
Meanwhile, Hims & Hers Health surged more than 50% in premarket trading after a report by Bloomberg indicated that Novo Nordisk plans to sell its weight-loss drugs through the company’s telehealth platform.
The partnership marks an unexpected reconciliation between the two companies following a recent legal dispute. Shares of Hims had fallen roughly 51% earlier this year, making Monday’s rally particularly notable.
