U.S. stock futures pointed lower early Monday as the conflict in Iran moved into its second week, raising concerns that surging oil prices could trigger a fresh inflation shock for the global economy. Crude has climbed above $100 per barrel, amplifying worries about renewed price pressures worldwide. Gold prices eased amid a strengthening U.S. dollar, while new data showed Chinese consumer inflation rose more than expected in February.
Futures retreat
U.S. equity futures declined Monday as investors continued to monitor the escalating fighting involving Iran, which has pushed oil prices sharply higher.
By 03:51 ET, Dow futures were down 783 points, or 1.7%, S&P 500 futures had fallen by 100 points, or 1.5%, and Nasdaq 100 futures had dropped 399 points, or 1.6%.
Wall Street’s major indexes had already ended the previous week with losses of more than 0.9%, as intensifying hostilities in the Middle East raised concerns about broader economic fallout.
Alongside the ongoing military campaign by U.S. and Israeli forces targeting Iran, investors were also digesting a weaker-than-expected February nonfarm payrolls report. The figures revived concerns that the U.S. labor market may be losing momentum.
“February’s overwhelmingly disappointing NFP report has left a bitter aftertaste to a week already wrecked by geopolitical conflict,” Lukman Otunuga, Senior Market Analyst at FXTM, told Investing.com.
Market participants are unlikely to see relief from headline risk in the near term.
Later this week, investors will be watching closely for the release of the U.S. consumer price index on Wednesday, a key measure of inflation. On Friday, the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures price index — will be published, along with data tracking job openings. Both reports will reflect January figures.
Oil rises above $100 per barrel
Brent crude, the international benchmark, climbed above $100 per barrel as trading resumed with renewed concerns that the conflict involving Iran could disrupt supplies passing through the strategically important Strait of Hormuz.
By 04:33 ET, Brent futures had jumped 16% to $107.15 per barrel.
Since the first wave of attacks more than a week ago, financial markets have been increasingly uneasy that tanker traffic through the strait — located just south of Iran — could remain largely halted. The passage is critical for global energy trade, with roughly one-fifth of the world’s oil supply normally passing through the narrow channel, much of it destined for Asian markets.
With concerns mounting over crew safety and limited availability of insurance coverage for voyages through the area, many ships have become stranded on both sides of the waterway. Container shipping companies have also begun rerouting vessels away from the region. Analysts at ING noted that upstream oil production is increasingly being curtailed as crude-exporting nations face storage constraints.
Meanwhile, Mojtaba Khamenei has been named Iran’s next Supreme Leader — a move that appears unlikely to facilitate any near-term ceasefire in the expanding conflict. The son of Ali Khamenei, who was killed in airstrikes at the start of the conflict on February 28, Mojtaba Khamenei has been described as an “unacceptable” choice by U.S. President Donald Trump.
“The combination of these production shut-ins and no signs of de-escalation in the war means the market is having to aggressively price in a prolonged supply disruption. The bottom line is that, as long as we don’t see oil moving through the Strait of Hormuz, oil prices will only move higher,” the ING analysts warned.
Oil prices pulled back slightly after reports suggested that Saudi Arabia may increase crude supplies to the market. The Financial Times also reported that G7 finance ministers are set to discuss the possibility of releasing emergency strategic petroleum reserves during an urgent meeting on Monday.
Oil surge revives inflation concerns
Highlighting the economic importance of energy costs, International Monetary Fund Managing Director Kristalina Georgieva warned that a sustained 10% increase in crude prices could lift global headline inflation by around 0.4 percentage points.
Speaking during a keynote address in Japan, Georgieva cautioned policymakers to “Think of the unthinkable and prepare for it.”
She urged governments and regulators to strengthen institutions and implement policies that support sustainable economic growth.
Renewed inflation pressures — which had been easing following the spike seen after the pandemic — could create additional challenges for the Federal Reserve. Already dealing with signs of weakness in the labor market, policymakers may now face the added complication of rising energy prices, while U.S. motorists are beginning to see gasoline prices increase.
Against this backdrop, investors have started to anticipate that the Fed could keep interest rates unchanged for longer than previously expected. Bond yields have edged higher, while the U.S. dollar has strengthened.
Gold slips
Gold prices declined but remained above session lows as the conflict involving the U.S., Israel and Iran encouraged investors to move into the U.S. dollar, making bullion more expensive for buyers using other currencies.
Despite the pullback, gold remained comfortably above the $5,000-per-ounce level as geopolitical uncertainty continued to drive demand for safe-haven assets.
Spot gold dropped 1.6% to $5,090.21 per ounce by 04:46 ET, while gold futures slipped 1.2% to $5,096.40 per ounce.
The metal had already fallen roughly 2% last week, fluctuating between $5,000 per ounce and the record high near $5,600 reached in late January. Since then, prices have experienced sharp swings amid increased speculative trading and uncertainty surrounding the outlook for interest rates.
Chinese inflation data
China’s consumer inflation rose more than expected in February, helped by increased spending during the Lunar New Year holiday, while producer prices continued to decline — though at a slower pace than anticipated.
According to official data released Monday, the consumer price index (CPI) rose 1.3% year-on-year in February, marking the fastest pace of growth since February 2023. The figure exceeded economists’ forecasts of 0.9% and represented a sharp acceleration from the 0.2% increase recorded the previous month.
Much of the rise in consumer inflation was attributed to stronger spending during the Lunar New Year celebrations in early February. This year, authorities in Beijing extended the holiday to a record nine days.
Chinese consumers increased spending on domestic travel, dining and discretionary purchases during the holiday period, helping push prices higher.
However, analysts at ANZ noted that outside of the seasonal boost, inflation in China remains mixed — leaving room for Beijing to consider additional monetary easing measures.