Futures tied to the main U.S. stock indices turned negative on Monday as markets wrestled with the implications of a widening conflict in Iran and a sharp jump in crude prices. Oil has climbed back above the $100-a-barrel threshold, a move that has intensified concern that energy-driven inflation could reaccelerate globally and complicate central bank decisions.
By 03:51 ET (07:51 GMT), futures showed notable weakness: the Dow futures contract was down 783 points, or 1.7%, S&P 500 futures had fallen 100 points, or 1.5%, and Nasdaq 100 futures were lower by 399 points, or 1.6%. These moves followed a week in which the major Wall Street averages each ended more than 0.9% lower as the conflict in the Middle East rattled investors.
Beyond the geopolitical shock, traders were still parsing a surprisingly soft February nonfarm payrolls report that has renewed questions about the underlying strength of the U.S. labor market. Lukman Otunuga, Senior Market Analyst at FXTM, captured the market mood when he said the disappointing NFP print has "left a bitter aftertaste to a week already wrecked by geopolitical conflict." Equity markets are likely to remain sensitive to headlines in the near term.
The economic calendar this week adds to the backdrop of uncertainty. On Wednesday, the monthly U.S. consumer price index is due, a central gauge for inflation trends. On Friday, investors will get the personal consumption expenditures price index - the Federal Reserve's preferred inflation measure - alongside a jobs openings tracker. Both of those releases will cover January data, and markets are watching to see whether the recent jump in energy costs will be reflected in broader price metrics.
Energy markets were at the center of the move: Brent crude, the global benchmark, surged above $100 per barrel as concerns mounted that the Iran conflict would disrupt flows through the Strait of Hormuz. By 04:33 ET, the Brent futures contract had jumped 16% to $107.15 a barrel.
Market attention has focused on the Strait of Hormuz, a narrow waterway just south of Iran that channels a substantial share of global oil shipments. The article's source material notes that roughly a fifth of the world's oil supply moves through this passage, with a large portion destined for Asia. Since the initial bombardments more than a week ago, traders and shipping firms have feared that the strait could remain effectively closed to tanker traffic, which would have a material impact on allocations and physical availability.
Operational frictions are already apparent: crews face safety concerns, insurance for transits has become hard to obtain, vessels are being stranded on either side of the strait, and container shippers have reported rerouting to avoid the region. Upstream oil production has begun to be shut in and countries are encountering storage constraints, a set of dynamics highlighted by analysts at ING, who warned that these shut-ins and an absence of de-escalation are forcing markets to price in an extended supply disruption.
Political developments in Iran have added to the market's nervousness. Mojtaba Khamenei was selected as Iran's next supreme leader - a decision described as unlikely to open the way to a ceasefire. Mojtaba Khamenei, identified as a son of Ali Khamenei who was slain in an air attack at the outset of the conflict on February 28, has been labeled "unacceptable" by U.S. President Donald Trump. Such developments have signaled to traders that resolution does not appear imminent.
Pressure on prices eased somewhat after reports suggested Saudi Arabia had offered to add more crude supply into markets. In addition, media accounts indicated that G7 finance ministers planned to discuss a joint release of emergency petroleum reserves at an emergency meeting on Monday. Those developments helped temper the near-term spike but did not eliminate the fundamental concerns about supply and the risk of a prolonged period of tighter availability.
The prospect of an oil-driven inflation impulse has attracted attention from global policymakers. International Monetary Fund head Kristalina Georgieva warned in a keynote address that a sustained 10% increase in crude could lift global headline inflation by around 0.4 percentage points. In that speech she urged policymakers to "think of the unthinkable and prepare for it," arguing that strengthening institutions and clearer regulations could support growth in a stressed environment.
For the Federal Reserve, the combination of a fragile labor market reading and renewed upward pressure on energy costs creates a difficult policy backdrop. Americans are beginning to see higher gasoline pump prices, which can feed into consumer sentiment and the overall inflation picture. Investors have responded by pricing in a longer period of unchanged policy from the Fed than previously thought; bond yields have moved higher in response, and the U.S. dollar has strengthened.
Precious metals displayed a mixed reaction. Gold prices fell from recent intra-session levels but remained elevated as geopolitical tensions continued to push flows toward traditional safe havens. Spot gold was down 1.6% to $5,090.21 per ounce by 04:46 ET, while gold futures were lower by 1.2% at $5,096.40 per ounce. The metal had retreated roughly 2% over the prior week after swinging between around $5,000/oz and a near $5,600/oz peak recorded in late-January. Volatility in speculative activity and uncertainty over interest rate trajectories contributed to those wild moves.
China provided a contrasting data point on the inflation front. Consumer prices in China rose more than expected in February, largely driven by increased spending around the Lunar New Year holiday. The consumer price index was up 1.3% year-on-year in February, the fastest pace since February 2023. That print exceeded market expectations of 0.9% and marked a substantial acceleration from the 0.2% increase recorded in the previous month.
The uptick in Chinese CPI was attributed in the underlying reporting to stronger domestic travel, dining out, and a range of discretionary services and goods as consumers took advantage of a record nine-day Lunar New Year holiday. However, analysts at ANZ noted that, outside of the seasonal boost tied to the holiday, inflation in China still appeared mixed, leaving room for policymakers in Beijing to consider monetary easing if they judged it necessary.
Taken together, the market moves highlight a set of interlocking dynamics: a geopolitical shock that has quickly translated into commodity price volatility, renewed uncertainty about inflation paths, and pressure on risk assets and safe havens alike. Energy and transportation sectors are most directly affected by disrupted flows and rising insurance costs; consumer-facing industries may feel earlier strains from higher fuel costs that feed into transport and input pricing; and financials are adjusting to rising yields and potential changes in central bank settings.
Investors and policymakers enter a period in which data releases and geopolitical developments will likely move asset prices rapidly. The upcoming U.S. CPI and PCE reports, the state of the labor market, and any further developments around oil flows through the Strait of Hormuz will be closely watched for signals on inflation persistence and the likely behavior of monetary policy.
For now, markets are balancing the possibility that short-term responses - such as additional crude supplies or coordinated reserve releases - could alleviate tightness, against the risk that sustained production disruptions and political escalation would require a re-pricing of inflation and growth expectations.