Stock futures experienced a decline ahead of Monday's trading session, driven by escalating tensions between Israel and Iran, which have caused a surge in oil prices and raised significant concerns among investors regarding the global economy. Specifically, futures for the Dow Jones Industrial Average fell by 92 points, representing a decrease of 0.2%. Similarly, futures for the S&P 500 and Nasdaq 100 also saw a decline of 0.2% each.
As trading commenced on Sunday night, WTI crude oil futures skyrocketed by an additional 3%, crossing the $75 per barrel threshold. Investors have been closely monitoring the situation in the Middle East since Israel's recent military strike on Iran. In response, Iran launched missiles, further intensifying the conflict in the region. This escalation prompted a significant sell-off in stocks on Friday, with the Dow experiencing a dramatic drop of over 700 points during the session. All three major indexes fell more than 1% on that trading day, leading to a challenging week for investors.
The declines on Friday resulted in all three major indexes ending the week in negative territory. The Dow concluded the week down 1.3%, while the S&P 500 and Nasdaq Composite recorded losses of 0.4% and 0.6%, respectively. The surge in oil prices was a direct consequence of Israel's military actions. In addition to oil, gold prices also saw a notable increase, as investors typically turn to the precious metal as a safe haven during periods of market volatility.
The conflict continued to escalate over the weekend, with both nations targeting each other's energy infrastructure. This ongoing strife poses a significant threat to the global economy and could further destabilize markets as the new week unfolds. Notably, Iran has indicated that it is contemplating the closure of the Strait of Hormuz, a critical passageway for the global oil market.
According to Ed Mills, a Washington policy analyst at Raymond James, the recent strikes mark the most significant assault on Iranian territory since the 1980s. Mills noted in a client communication that the risk of regional escalation is heightened. The extent to which these hostilities could expand will likely depend on the involvement and impact of the U.S. and Russia in the coming days and weeks.
