US stock futures fell early Monday after the country struck two Iranian rocket launchers on Larak Island in the Strait of Hormuz, raising concerns about a broader conflict in the Middle East. This came just as Wall Street was preparing to close out a strong month, with major US stock indexes still set to post gains in August. The market’s immediate reaction was negative. Oil prices rose as investors watched the situation in the region.
Dow Jones Industrial Average futures dropped 155 points, or 0.29%. S&P 500 futures lost 0.36%, and Nasdaq-100 futures were down 0.4%. Asian markets moved lower as well. South Korea’s Kospi was down 0.52%. Japan’s Nikkei 225 lost 0.57%. Hong Kong’s Hang Seng Index fell 0.71%, and China’s CSI 300 declined 0.81%. Australia’s S&P/ASX 200 was down 0.26%.
Larak Island Strikes Lift Crude and Hit Futures
The US strikes on Iran gave investors one more thing to stress over at the start of the week. US Central Command told MS NOW on Sunday that US forces struck two rocket launchers on Iran’s Larak Island. The attack affected energy markets right away. US crude prices rose 2.1% to $85.14 per barrel, with Brent futures up 2% to $89.90. Those higher oil prices reflected concerns about what the conflict could mean for the Strait of Hormuz, which is a key gateway for global energy shipments.
Rising oil prices put more pressure on inflation, which was already worrying investors. The reports pointed out that August had been a turbulent month partly because inflation fears pushed Treasury yields to some of their highest levels in years. The Treasury Department tried to calm things down by saying it planned to buy back more debt. Still, long term yields stayed high.
Federal Reserve Chairman Kevin Warsh warned about inflation on Friday. He said that, while inflation numbers this summer looked better than expected, he did not see clear signs that deeper trends had really improved. Barclays economist Jonathan Millar said Warsh’s comments made a 25bp September rate hike likely. The firm also expected another increase in December.
Wall Street Heads Toward a Strong August
Even after Monday’s decline, US stocks were still positioned to finish August with solid gains. The Dow was up 2.1% for the month, heading toward its fifth straight monthly advance. The S&P 500 gained 3%, and the Nasdaq Composite rose 4%. Both S&P 500 and Dow reached all time highs earlier in the month.
Technology stocks have been a major force behind the market’s performance. The S&P 500 technology sector was up almost 6% in August, with some major companies posting even bigger gains. Nvidia climbed more than 8% during the month. Microsoft was up 11%. Micron Technology gained 13%. This strong performance showed how much investors were still focused on artificial intelligence.
Still, these gains came against significant market uncertainty. Investors have been dealing with higher yields, inflation concerns, and shifting expectations around Federal Reserve policy. Tensions in the Middle East added to the market’s ups and downs.
August Jobs Report Due Friday
Now, attention turns to new economic data due out later in the week. The August jobs report comes out Friday morning and will give investors more insight into the state of the US economy. Monthly manufacturing and services sector reports are due too, providing more clues as markets assess the direction of inflation and economic health.
For now, Wall Street heads into the end of August after a strong month, but with new pressure from geopolitical tensions, higher oil prices, inflation concerns, and uncertainty over the Federal Reserve’s next moves.
Also read: Global Markets Hold Steady as US Inflation Stays Above Target
