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- Wall Street futures fell over 1% due to Middle East conflict fears.
- Airlines and financial stocks dropped; oil prices rose, boosting defense and mining stocks.
- The conflict's impact on oil could drive inflation, affecting Federal Reserve rate decisions.
NEW YORK CITY — United States stock index futures dropped over 1% on Monday as investors braced for a prolonged Middle East conflict that threatened to disrupt global trade routes and reignite inflationary pressures.
Sectors hit the hardest in premarket trading included airlines, as several carriers halted flights, while several oil and gas facilities in the Middle East stopped production, which pushed crude prices up 8%.
That painted an overall cloudy outlook for the global economy and also weighed on financial stocks.
Delta and United Airlines tumbled 6% each in premarket trading. Big banks such as Bank of America and Citigroup slid 2% each.
Investors instead flocked to traditional safe havens such as the dollar. Higher precious metals prices helped miners such as Kinross Gold and Barrick Mining add 2% each.
Defense stocks also got a boost, with Lockheed Martin and RTX gaining over 6% each, while Kratos rose 6.3% and AeroVironment was up 11%.
After coordinated U.S. and Israeli strikes on Iran over the weekend killed Tehran's Supreme Leader, Israel launched retaliatory attacks following air strikes by Iran and Hezbollah militants in Lebanon, deepening fears that the conflict could widen further across the region.
U.S. President Donald Trump also said the conflict could last another four weeks, according to a report.
"With Trump saying the campaign could run for four weeks, there is plenty of scope for more downside should the conflict widen to encompass oil and gas infrastructure," said Chris Beauchamp, chief market analyst at online trading and investing platform IG.
At 07:22 a.m. ET, Dow E-minis were down 574 points, or 1.17%, and S&P 500 E-minis were down 78.5 points, or 1.14%. Nasdaq 100 E-minis were down 365.5 points, or 1.46%.
Wall Street's fear gauge, the CBOE VIX index, jumped 3.54 points to a three-month high of 23.4.
The escalation comes at a precarious moment for markets already rattled by AI disruption concerns, private credit jitters and trade policy uncertainty - factors that drove the S&P 500 and the Nasdaq to their steepest monthly declines since March 2025 on Friday.
A sustained spike in oil prices threatens to compound inflationary pressures just as data shows U.S. tariffs are already pushing prices higher.
Those concerns lifted Treasury yields from early declines, and investors increased their bets that the Federal Reserve would stay put on interest rates in June.
Wells Fargo's chief equity strategist, Ohsung Kwon, said that the benchmark S&P 500 could fall to 6,000 points, or nearly 13% below the last close, if crude prices hit over $100 per barrel in a worst-case scenario. Earnings could also be hit by about 1.3% in an oil‑driven stagflation shock.
Oil companies Occidental Petroleum and ConocoPhillips added about 6% each, while crude-price-sensitive cruise stocks Carnival and Norwegian Cruise fell 7% each.
Separately, Norwegian Cruise forecast annual profit below Wall Street expectations.
A consortium led by BlackRock-owned Global Infrastructure Partners and equity firm EQT AB agreed to acquire AES Corp for $33.4 billion, including debt. However, the utilities company's shares fell 17%.
On the data front, manufacturing PMIs for last month are due later in the day, and the focus will shift to a key non-farm payrolls report later in the week.
