U.S. equity futures were trading lower early Monday as the conflict involving Iran entered its second week, intensifying concerns that a surge in oil prices could spark a fresh inflation shock for the global economy. Crude has climbed above $100 per barrel, raising worries about renewed price pressures worldwide. Gold edged lower as the U.S. dollar strengthened, while fresh data showed Chinese consumer inflation increased more than expected in February.
Futures move lower
U.S. stock futures declined Monday as investors continued to track the escalating hostilities linked to Iran, which have driven oil prices sharply higher.
By 03:51 ET, Dow futures had fallen 783 points, or 1.7%, S&P 500 futures were down 100 points, or 1.5%, and Nasdaq 100 futures had dropped 399 points, or 1.6%.
Wall Street’s key indexes had already ended the previous week with losses exceeding 0.9%, as the intensifying Middle East conflict raised fears about potential damage to the global economy.
Alongside the ongoing military campaign by U.S. and Israeli forces targeting Iran, investors were also reacting to a weaker-than-anticipated February nonfarm payrolls report. The data renewed concerns that the U.S. labor market may be showing signs of strain.
“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.
Markets are unlikely to see a break from headline-driven volatility in the near term.
Investors will be closely watching key economic releases later this week. The U.S. consumer price index is due Wednesday and will provide a fresh look at inflation trends. On Friday, the personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge, will be published along with new data on job openings. Both releases will cover January.
Oil climbs above $100 per barrel
Brent crude, the global oil benchmark, surged above $100 per barrel as energy markets reopened amid renewed fears that the conflict with Iran could disrupt supplies flowing through the strategic Strait of Hormuz.
By 04:33 ET, Brent futures had jumped 16% to $107.15 per barrel.
Since the initial strikes more than a week ago, financial markets have grown increasingly uneasy about the possibility that tanker traffic through the strait — located just south of Iran — could remain largely halted. The narrow waterway is a vital artery for global energy trade, with roughly one-fifth of the world’s oil supply passing through it, much of it destined for Asian markets.
Growing safety concerns for crews and difficulties obtaining insurance coverage for voyages through the region have left many vessels stranded on both sides of the strait. Container shipping firms have also begun diverting routes away from the area. Analysts at ING noted that upstream oil production is increasingly being curtailed as crude-exporting countries run up against storage limits.
Meanwhile, Mojtaba Khamenei has been named Iran’s next Supreme Leader — a decision that appears unlikely to pave the way for a ceasefire in the expanding conflict. The son of Ali Khamenei, who was killed in airstrikes at the outset of the war 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’s rally eased somewhat after reports indicated that Saudi Arabia may increase crude supply to global markets. The Financial Times also reported that G7 finance ministers plan to discuss the potential release of emergency petroleum reserves during a crisis meeting scheduled for Monday.
Oil surge rekindles inflation fears
Highlighting the economic significance of energy costs, International Monetary Fund Managing Director Kristalina Georgieva warned that a sustained 10% rise in oil prices could push global headline inflation up by roughly 0.4 percentage points.
Speaking at an event in Japan, Georgieva urged policymakers to “Think of the unthinkable and prepare for it.”
She argued that governments should prioritize strengthening institutions and advancing regulatory frameworks that support economic expansion.
The risk of renewed inflation — which had cooled after the sharp spike following the pandemic — presents a complicated challenge for the Federal Reserve. Policymakers already face signs of softness in the labor market, and rising energy prices could further complicate their policy outlook as Americans begin to see higher gasoline prices.
In response, investors have increasingly bet that the Fed could keep interest rates unchanged for longer than previously anticipated. Bond yields have moved slightly higher, while the U.S. dollar has strengthened.
Gold slips
Gold prices declined but stayed above their session lows as the conflict involving the U.S., Israel and Iran drove flows into the U.S. dollar, making bullion more expensive for international buyers.
Even with the pullback, gold remained comfortably above the $5,000-per-ounce level, as geopolitical uncertainty continued to support demand for safe-haven assets.
Spot gold fell 1.6% to $5,090.21 per ounce by 04:46 ET, while gold futures dropped 1.2% to $5,096.40 per ounce.
The metal had already lost roughly 2% last week, fluctuating between $5,000 per ounce and the record high near $5,600 reached in late January. Since then, gold prices have experienced sharp swings amid increased speculative trading and ongoing uncertainty over the outlook for interest rates.
Chinese inflation data
China’s consumer inflation rose more than expected in February, supported by stronger spending during the Lunar New Year holiday, while producer prices continued to decline — though at a slower pace than economists had forecast.
Official figures released Monday showed the consumer price index (CPI) climbed 1.3% year-on-year in February, marking the fastest growth since February 2023. The reading exceeded forecasts of 0.9% and represented a sharp acceleration from the 0.2% increase recorded the previous month.
The rise in consumer inflation was largely driven by increased spending during the Lunar New Year celebrations in early February. This year, authorities in Beijing extended the holiday period to a record nine days.
Chinese consumers boosted spending on domestic travel, dining and various discretionary goods during the festive period, contributing to the rise in prices.
However, analysts at ANZ noted that excluding the seasonal effect, inflation in China remains uneven, leaving room for Beijing to consider additional monetary easing measures.
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