U.S. equity futures signalled sharp declines after large-scale airstrikes by the United States and Israel against Iran heightened fears of a broader regional conflict. The escalation sent oil prices higher and prompted investors to shift away from risk assets toward traditional safe havens such as gold. Asian equities also moved lower, pressured by uncertainty surrounding artificial intelligence developments and their potential impact on the technology sector.
Futures fall sharply
U.S. stock futures dropped significantly on Monday as markets reacted to the joint U.S.-Israeli attacks on Iran and growing concerns that hostilities could spread across the wider Middle East.
At 02:54 ET, Dow futures were down 733 points, or 1.5%, S&P 500 futures had fallen 104 points, also 1.5%, and Nasdaq 100 futures declined 463 points, or 1.9%.
The coordinated strikes carried out on Saturday targeted multiple Iranian locations and reportedly killed several senior Iranian figures, including Supreme Leader Ayatollah Ali Khamenei. U.S. President Donald Trump urged Iranian opposition groups to challenge the country’s long-standing governing system, although many senior U.S. officials remain doubtful that regime change is imminent, according to Reuters.
Uncertainty remains over how long Washington intends to stay militarily engaged. Trump told the New York Times that operations could continue for “four to five weeks.” He also declined to outline a detailed plan for political transition in Iran, saying he has “three very good choices” to lead the country but “won’t be revealing them now,” the New York Times reported.
Iran responded with retaliatory strikes targeting locations across the Middle East, including energy-producing Gulf states. Media reports citing U.S. Central Command said three American service members were killed and five seriously injured, while Trump warned that additional casualties could follow.
Indications that the conflict may be expanding emerged as Israel struck Hezbollah targets in Lebanon. The Wall Street Journal also reported that at least one U.S. aircraft had been downed in Kuwait.
Oil surges on supply disruption fears
Oil markets rallied strongly following the escalation, as traders weighed the possibility that Iran could attempt to block the Strait of Hormuz — a critical shipping route responsible for roughly one-fifth of global oil supply and about 20% of worldwide liquefied natural gas flows.
By 03:24 ET, Brent crude futures had jumped 10% to $80.14 per barrel, while U.S. West Texas Intermediate crude futures climbed 9.3% to $73.26 per barrel.
Although Tehran has not officially closed the strait, Reuters reported that maritime tracking data shows tankers beginning to accumulate on both sides as operators grow concerned about potential attacks or face difficulties securing insurance coverage.
A sustained increase in oil prices could pose risks to the global economy by reigniting inflation pressures and weighing on consumer demand. If the conflict continues for an extended period, costs for fuel, electricity and other energy-related goods may rise further.
“How sustained any spikes are depends on how long attacks persist,” analysts at ING said in a note to clients.
“While it is still very early days and the situation is developing at a fast pace, it does not appear that this military action will be quick and short-lived,” like previous U.S.-Israeli attacks on Iran last year, they added.
Some analysts cited by the New York Times noted that, despite the surge, oil prices remain within historical ranges. A prolonged global supply surplus could help cushion the impact, further supported by OPEC+ plans announced Sunday to modestly increase production next month.
Gold gains as investors seek safety
Gold prices rose as investors moved funds into safe-haven assets amid escalating geopolitical risk.
Spot gold advanced 2.3% to $5,402.31 per ounce by 03:44 ET, while U.S. gold futures climbed 3.3% to $5,418.09.
“A regional spillover or disruption to energy supplies would materially boost gold through higher oil prices, increased inflation expectations and contained real yields,” the ING analysts said.
Beyond geopolitical developments, investors are also preparing for a busy week of economic data releases and corporate earnings. The February U.S. jobs report is due alongside results from Broadcom and Target during the first week of March.
Asian markets decline
Asian equities also fell, following a weaker close on Wall Street on Friday as concerns over artificial intelligence developments and interest rate expectations weighed on technology shares.
Hong Kong’s Hang Seng index and Japan’s Nikkei 225 were among the region’s biggest decliners, dropping 2.1% and 1.4%, respectively.
Alongside geopolitical concerns, technology stocks faced additional selling pressure amid uncertainty about how AI advancements may reshape competition within the sector. Software companies in particular experienced notable losses in February due to fears of increased competition from AI-driven tools.
Berkshire Hathaway earnings fall
Berkshire Hathaway (NYSE:BRK.B) reported on Saturday that fourth-quarter operating profit declined nearly 30% year over year, primarily due to weaker insurance underwriting performance.
In Warren Buffett’s final quarter as chief executive officer, insurance underwriting earnings more than halved to $1.56 billion, while insurance investment income dropped nearly 25% to $3.07 billion.
The conglomerate also recorded $4.5 billion in impairment charges linked to its investments in Kraft Heinz (NASDAQ:KHC) and Occidental Petroleum Corporation (NYSE:OXY).
Operating earnings totaled $10.2 billion for the quarter ended December 31, compared with nearly $14.53 billion a year earlier.
The results included the first shareholder letter written by Greg Abel, Buffett’s chosen successor, who acknowledged that Buffett was “obviously a hard act to follow.”
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