Futures tied to major U.S. stock indices moved lower Monday as the conflict with Iran continues, raising concerns about a prolonged surge in global energy prices. U.S. President Donald Trump has given Iran until Monday night to reopen the Strait of Hormuz, an ultimatum Tehran has rejected. Meanwhile, the International Energy Agency cautioned that the conflict could trigger a “very severe” oil crisis, while the U.S. dollar strengthened and gold prices retreated.
Futures edge lower
U.S. equity futures were under pressure early Monday as the Iran war entered its fourth week.
By 04:04 ET, Dow futures were down 305 points (0.7%), S&P 500 futures had fallen 55 points (0.8%), and Nasdaq 100 futures had dropped 227 points (0.9%).
Global equity markets also faced renewed selling pressure, particularly in Asia where many economies depend heavily on energy imports from the Persian Gulf. Europe’s Stoxx 600, which is closely watched in a region that also relies on natural gas shipments from the Gulf, also declined.
On Friday, Wall Street’s main indices closed lower as investors worried that a prolonged U.S.-Israeli campaign against Iran could intensify an already building energy price shock.
Brent crude, the global oil benchmark, finished last week slightly above $112 per barrel, far higher than the roughly $70 per barrel level seen before the war began in late February.
The rise in oil prices has already had ripple effects. U.S. gasoline prices have surged nearly 32% to $3.94 per gallon since the start of the conflict, according to the New York Times, citing data from the AAA motor club. Diesel prices have also climbed, increasing the risk of broader inflation pressures — an issue that reportedly drew attention from Federal Reserve policymakers last week.
The Federal Reserve kept interest rates unchanged at 3.5% to 3.75%, while expectations for rate cuts later this year weakened. Some market participants have even begun to speculate that a sustained energy price spike could prompt the central bank to consider raising rates again.
Trump’s Iran ultimatum
Investors have been monitoring developments in the Middle East closely, including an ultimatum issued by President Trump to Tehran.
Trump warned that the U.S. could strike critical Iranian power facilities if Iran does not reopen the Strait of Hormuz — a narrow waterway that has become a central flashpoint in the conflict — by Monday night. Roughly 20% of global oil supply passes through the strait, but tanker traffic has largely halted due to fears that Iran could target ships it views as linked to hostile nations.
Iran dismissed the warning, stating the strait would remain “completely closed” if any of its energy infrastructure were attacked.
Signals from Washington have also appeared mixed. Although Trump said the U.S. could “obliterate” key Iranian power sites, he has also suggested the military campaign might soon be “winding down.” Media reports have indicated that the White House has begun considering what a potential ceasefire arrangement with Tehran might involve.
Despite continued strikes on Tehran and Israel’s declaration that its fight with Iran-backed militants in Lebanon is just beginning, Trump “seems to be steering toward an exit ramp” while facing domestic criticism over the war and its growing economic consequences, analysts at Vital Knowledge said.
IEA warns of “very severe” oil crisis
Still, the crisis in the Middle East represents a “very severe” shock to global oil markets, according to International Energy Agency Executive Director Fatih Birol, who said the disruption could be more serious than past crises in the 1970s.
Speaking at an event in Australia, Birol said the IEA is consulting with governments in Europe and Asia about potentially releasing additional oil reserves to offset supply disruptions caused by the blockage of the Strait of Hormuz.
“If it is necessary, of course, we will do it. We look at the conditions, we will analyze, assess the markets and discuss with our member countries,” he said.
Earlier this month, IEA member countries agreed to release a record 400 million barrels of strategic reserves — about 20% of total stockpiles.
However, Birol stressed — echoing comments from many analysts — that only a full reopening of the Strait of Hormuz will bring stability back to energy markets.
Oil prices continued to climb Monday, with Brent futures rising 1.7% to $114.07 per barrel.
Dollar strengthens
The U.S. dollar gained ground as investors sought the currency as a relative safe haven amid the ongoing conflict.
By 04:40 ET (08:40 GMT), the U.S. dollar index, which tracks the greenback against a basket of major currencies, had risen 0.1% to 99.75.
Over the past month, the index has climbed more than 2%, although it recorded its first weekly decline since the start of the conflict on Friday.
Elsewhere, the Australian dollar, often seen as a barometer of global risk sentiment, weakened. The Japanese yen also fell, prompting Japan’s top currency official to warn that authorities are prepared to intervene to manage excessive volatility.
“Risk sentiment is deteriorating at the start of this week as the U.S. and Iran appear far from peace discussions,” analysts at ING said.
Gold declines
Analysts at ING, including Francesco Pesole and Chris Turner, noted that precious metals were also trending lower, arguing that current market conditions “heavily favors” the dollar.
Gold prices fell sharply on Monday as worries about persistent inflation and elevated interest rates reduced demand for the metal as a safe haven. The decline effectively erased most of gold’s gains recorded earlier this year.
Investors are increasingly concerned that higher energy costs could drive a renewed rise in global inflation, which in turn may force central banks to keep interest rates elevated for longer.
Because gold does not generate yield, it tends to struggle in environments where interest rates are high.
“The market is trading less on geopolitical hedging flows and more on fears that stickier inflation could prompt a more hawkish central bank stance,” analysts at OCBC said.