Wall Street futures fell on Monday as fresh escalations between Iran and the U.S. in the Gulf region rattled investors and sent oil prices higher. The tech-heavy Nasdaq futures led declines, with semiconductor stocks being among the biggest premarket losers. This geopolitical tension cast doubt on an interim U.S.-Iran agreement signed last month that aimed to reopen the Strait of Hormuz, a crucial conduit for global energy supplies, and end the conflict within 60 days. Investors are now more keenly pricing in at least one 25-basis-point rate hike by year-end, according to LSEG data.
Crude futures rose more than 3%, with Brent crude climbing 4.1% to reach $79.11 a barrel and U.S. crude adding 4.1% to $74.37 a barrel. The increase in oil prices reignited inflation concerns, prompting expectations that central banks may need to hike interest rates. Kathleen Brooks, research director at XTB, noted that the rise in geopolitical tensions and oil prices is disrupting momentum and will likely impact technology and chip stock performance. The dollar also strengthened due to safe-haven buying and increased bets on Federal Reserve rate hikes.
Memory-chip makers experienced sharp declines, with Micron Technology down 5.3%, Western Digital falling 5.5%, Seagate dropping 4.3%, and SanDisk losing 6.5%. U.S.-listed shares of SK Hynix also fell 8.1% after its recent blockbuster Nasdaq debut. The iShares semiconductor ETF saw a 2.6% decline. S&P 500 E-minis were down 0.31%, Nasdaq 100 E-minis were down 0.94%, and Dow E-minis were down 0.04%. These market movements occurred ahead of a busy week featuring key economic data, such as Tuesday's U.S. consumer price index, and the start of second-quarter corporate earnings reports from major banks like JPMorgan Chase, Goldman Sachs, and Morgan Stanley, as well as Netflix, General Electric, and UnitedHealth.
Fed Chair Kevin Warsh is expected to deliver his first monetary policy testimony before Congress on Tuesday, and Fed Governor Christopher Waller is scheduled to speak on the economic outlook. The S&P 500 is currently up over 10% for the year, less than 1% below its early-June record close, having posted a second consecutive weekly gain last week despite prior volatility in semiconductor shares and initial U.S.-Iran tensions. However, the renewed hostilities present a significant test for the resilience of the U.S. equity rally and the overall health of corporate America.
