U.S. stock index futures pointed to a lower open on Wednesday as crude oil prices extended their recent gains, with Brent moving above $100 a barrel for the first time since July.
U.S. crude futures were also up about 3% after U.S. forces destroyed five Iranian crude oil carriers following ballistic missile attacks by Iran’s Islamic Revolutionary Guard Corps targeting a U.S. Navy warship.
U.S. Central Command said Iran had used the tankers as part of a multibillion-dollar network financing the IRGC and regional groups aligned with it.
Iran subsequently launched missiles targeting U.S. military positions in Jordan.
Higher oil prices put inflation in focus
The increase in crude prices came ahead of the Federal Reserve’s monetary policy meeting next week, with investors assessing the potential implications of higher energy costs for inflation.
“Brent crude pushing above $100 a barrel has had a psychological effect on the market, pushing a hypothetical inflation worry gauge to ‘serious’ status and dragging down financial assets,” said Dan Coatsworth, head of markets at AJ Bell.
“The oil price has now jumped by 28% since early August,” he added. “This type of ascent could leave businesses and consumers feeling sick at the thought of sharp cost increases and potentially higher borrowing costs if central banks choose to fight inflation with interest rate hikes.”
Investors are also awaiting U.S. consumer and producer price inflation data later this week, which could influence expectations for monetary policy.
Dow falls more than 600 points
U.S. equities closed lower on Tuesday as trading resumed following the Labor Day weekend.
The Dow Jones Industrial Average declined 628.18 points, or 1.2%, to 52,786.07. The S&P 500 fell 45.08 points, or 0.6%, to 7,673.52, while the Nasdaq Composite declined 85.58 points, or 0.3%, to 26,421.41.
Oil prices had also increased during Tuesday’s session following further military activity involving the U.S. and Iran.
U.S. crude futures rose nearly 2% after the U.S. struck three Iranian crude oil carriers over the weekend following Iranian ballistic missile launches towards two U.S. Navy warships.
Iran has said it would retaliate against additional U.S. attacks on its assets, while Saudi-led coalition forces said they would respond to attacks by Houthi forces.
Tehran also said an agreement with Oman concerning shipping through the Strait of Hormuz was imminent.
Amgen declines more than 10%
Amgen (NASDAQ:AMGN) shares fell more than 10% on Tuesday after Novartis (NYSE:NVS) reported results from a late-stage clinical trial of a competing cholesterol treatment.
Pharmaceutical stocks declined more broadly, with the NYSE Arca Pharmaceutical Index falling 3.2%.
Higher Treasury yields also coincided with declines in interest rate-sensitive housing stocks, with the Philadelphia Housing Sector Index down 2.8%.
Healthcare, airline and biotechnology shares also moved lower, while networking, oil and semiconductor stocks recorded gains.