U.S. stock index futures slid in Asian trading on Monday as an escalating conflict in the Middle East pushed oil prices near $120 a barrel, raising fears that higher energy costs could slow the U.S. economy and fuel inflation.
S&P 500 Futures fell 1.6% to 6,637.25 points, while Nasdaq 100 Futures declined 1.8% to 24,257.25 points by 03:01 ET (07:01 GMT). Dow Jones Futures dropped 1.7% to 46,653.0 points.
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Surging oil prices stoke inflation worries Wall Street ended last week in negative territory as geopolitical tensions mounted. The Dow Jones Industrial Average fell about 3% for the week, while the S&P 500 dropped 2%. The tech-heavy NASDAQ Composite posted a 1% weekly decline.
The drop in futures came as crude prices surged after the conflict involving the U.S., Israel, and Iran intensified over the weekend.
U.S. benchmark West Texas Intermediate crude climbed near $120 a barrel amid fears of supply disruptions and risks to shipping through the Strait of Hormuz, a key artery for global oil trade.
The spike in oil has heightened concerns that a renewed energy shock could push inflation higher and weigh on consumer spending in the U.S.
A sustained rally in crude prices could complicate the policy outlook for the Federal Reserve by keeping price pressures elevated even as economic growth shows signs of moderating.
Iran picks Khamenei’s son Mojtaba as new supreme leader Geopolitical developments over the weekend further unsettled markets after Tehran named Mojtaba Khamenei as the country’s new supreme leader following the death of Ali Khamenei.
Mojtaba, widely seen as a hardliner, is expected to maintain Iran’s confrontational stance toward the West.
Meanwhile, Donald Trump posted on Sunday evening that the increase in oil prices was an acceptable consequence of military action against Iran’s nuclear program.
Trump said that a rise in “short term oil prices” was a “very small price to pay” for destroying what he described as Iran’s nuclear threat.
Investors also await several key economic releases due later in the week, including fresh readings on inflation, employment and gross domestic product, which could provide further clues about the strength of the U.S. economy and the Fed’s rate outlook.
