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(Bloomberg) — US stock futures slumped before Thursday’s bell as conflict in the Middle East intensified, pushing oil prices close to $100 a barrel.
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S&P 500 Index futures fell 0.7% at 8:10 a.m. in New York, with the gauge set to extend declines for a third-straight session, while Nasdaq 100 Index contracts dropped 0.6%. Brent crude traded 6.9% higher to $98.30, having jumped above $100 earlier in the session.
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Hostilities are fast-approaching a third week, with no sign of de-escalation. Iran escalated attacks on parts of Dubai and shipping assets, driving oil prices higher and increasing concern among traders about how much longer the conflict in the Middle East will go on for.
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“What you’re are seeing is the market pricing a long-lasting scenario of high oil prices,” said Karen Georges, an equity fund manager at Ecofi in Paris. “The security of shipping in the region is a big concern while the release of emergency oil reserves can only provide temporary relief.”
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The International Energy Agency said in a monthly report that the Iran war is causing unprecedented turmoil in oil markets. Global oil supply will be slashed by 8 million barrels a day this month, or almost 250 million barrels in total, the IEA estimated. The report comes after the agency’s members agreed to release 400 million barrels from emergency reserves on Wednesday.
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“While Trump’s claim that we could soon see a resolution to the conflict does provide hesitancy for the bulls, the reality of the situation will undoubtedly call for higher prices as the days roll on,” said Joshua Mahony, chief market analyst at Scope Markets.
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Higher fuel prices that threaten to quicken inflation dampen the outlook for Federal Reserve interest-rate cuts.
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Oil at $140 per barrel for two months “would be enough to push parts of the global economy into a mild recession,” Ryan Sweet of Oxford Economics wrote in a note. “The correlation between fluctuations in the stock market and changes in oil prices increases during oil shocks,” he added.
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Tariff Turns
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Outside of the Middle East conflict, traders are also paying attention to the latest development on the tariff front. The Trump administration has started the first of several trade investigations, setting the stage for levies that will replace the ones struck down.
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China, the European Union and Japan are among the major economies subject to a probe. The investigations, which typically take months to complete, are necessary for President Donald Trump to unilaterally place duties on imports from specific countries deemed to employ unfair trading practices.
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In premarket trading, Bumble Inc. soared 21% after the online-dating firm delivered an upbeat outlook and unveiled an artificial intelligence-powered assistant to act as a personal matchmaker.
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