On Sunday evening, U.S. stock futures signaled a move toward safety as market participants reacted to the U.S. and Israeli strikes on Iran over the weekend.
The market decline follows developments related to Operation Epic Fury, occurring as the FBI investigates a mass shooting in Texas from the previous night.
Meanwhile, President Donald Trump has pointed toward a goal of regime change, stating on social media Saturday that military operations will continue as long as necessary to reach the objective of establishing peace in the Middle East and globally.
Futures for the Dow Jones Industrial Average dropped 482 points, or 0.97%. S&P 500 futures declined by 0.85%, while Nasdaq futures fell 0.88%.
U.S. oil futures surged 7.25% to $71.88 per barrel, and Brent crude rose 8.1% to $78.77. In earlier over-the-counter trading on Sunday, prices jumped 10% to approximately $80 per barrel. Last year, Iran produced 4.7 million barrels of oil per day, representing 4.4% of the global supply.
However, a more significant risk involves the potential for Iran to block the Strait of Hormuz, a critical passage for 20% of the world’s oil exports. Analysts suggest that any move to close the strait could drive prices up to $100 per barrel.
The Islamic Revolutionary Guards Corps has reportedly cautioned ships against entering the strait and claimed on Sunday to have hit three oil tankers with missiles. Even before these reports, the threat of such strikes had halted maritime traffic.
Numerous tankers carrying oil and liquefied natural gas were already stationary or anchored near the Strait of Hormuz. This occurred after major oil companies, trading firms, and vessel owners suspended transits through the area on Saturday as a safety precaution.
Additionally, the Greek shipping ministry has advised vessels to steer clear of the Persian Gulf, the Gulf of Oman, and the Strait of Hormuz. Shipping giant Maersk also announced it is halting all transits through the strait until further notice.
According to Idanna Appio, a senior analyst and portfolio manager for sovereign debt and foreign exchange, a closure of the strait would most heavily impact Asia, as many regional economies are major oil importers dependent on those shipping lanes.
Alan Gelder, a senior vice president at Wood Mackenzie, estimated that it could take several weeks for export flows to resume, even under an optimistic scenario where Tehran cooperates with the U.S.
Until that time, he noted that price outlooks face significant upside risk, drawing parallels to the 2022 invasion of Ukraine by Russia when oil reached $125 per barrel.
To be sure, the impact could be softened by additional supply, with plans to increase production by 206,000 barrels per day in April, up from previous monthly increments of 137,000 barrels.
“However, there is a risk that the OPEC+ decision becomes irrelevant if oil cannot flow through the Strait of Hormuz,” Gelder remarked.
Gold prices rose 2.3% to $5,370.50 per ounce, while silver increased 3% to $95.55. The 10-year Treasury yield fell 1.3 basis points to 3.949%. The U.S. dollar gained 0.32% against the euro and 0.19% against the yen.
Early trends in Asian currency markets, where the Australian dollar—often seen as a market indicator—fell about 0.5%, suggested that while investors are acting defensively, they have not yet priced in a major crisis, said Appio, who manages the Global Income Builder at First Eagle.
“I do not believe this currently feels like a liquidity-driven event,” she stated .
Regarding sovereign risk in the Gulf, Appio explained that while Iran has targeted the UAE, Qatar, and Bahrain with drones and missiles, the impact on regional risk is limited because most of those nations possess strong balance sheets.
She suggested the situation might represent a buying opportunity for investors rather than a sign of structural decline. While the long-term question is whether the conflict will eventually lead to reduced regional risk, she noted that is a future consideration rather than one for the coming week.
Investors are also looking toward a week of significant economic data. On Monday, the Institute for Supply Management will release its manufacturing index. Wednesday will see the release of ADP private-sector payroll data and the Federal Reserve’s Beige Book. Fourth-quarter productivity figures are due Thursday, followed by the Labor Department’s monthly jobs report on Friday.