Updated 2 min read
US stock futures sold off again on Tuesday morning after Israel and US jets launched new strikes on Iran, as the widening conflict stoked worries about full-on regional war.
Contracts on the S&P 500 (ES=F) dived roughly 1.8%, while those on the Dow Jones Industrial Average (YM=F) pulled back 1.6%. Nasdaq 100 (NQ=F) futures led the retreat, dropping nearly 2.3%, as oil prices continued to rally on concerns about blocked supply.
The fresh wave of Israeli-led attacks has jolted markets that on Monday mostly managed to shake off the initial shock of the outbreak of US-Iran hostilities. The major US gauges staged a comeback from steep intraday losses to mostly close higher, as dip-buyers stepped in.
Tuesday’s air strikes on Iran and Lebanon intensify a conflict that Wall Street expects to pressure global markets. The focus is now on Tehran’s response after Iran targeted oil infrastructure and other targets across a huge swathe of the region, with at least nine countries reporting hits.
Crude prices (BZ=F, CL=F) continued to rise on concerns that hostilities could disrupt key supply routes and reignite inflation pressures. According to Reuters, the Strait of Hormuz had been closed, with threats made against vessels attempting to pass through the waterway.
The conflict entered its third day Monday following joint US-Israeli strikes that killed Iran’s Supreme Leader, Ayatollah Ali Khamenei. President Trump indicated the war could last four to five weeks, though he acknowledged it could extend longer, with strong potential for economic knock-on effects to spread in the US and beyond.
Investors are also watching corporate earnings. Retail will see the largest slew of results, with Target (TGT) scheduled to report Tuesday, while later in the week reports are expected from wholesale retailer Costco (COST).
LIVE 9 updates
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Continued weakness in Ford & General Motors pre-market
You may be wondering why we are seeing Ford (F) and General Motors (GM) sell-off more than the broader market this week. Sure, there is the thinking that with stocks down and with us at war, people put off buying the more expensive cars and trucks each automaker continues to hawk.
But keep this mind. Both automakers have made a hard pivot away from electric vehicles and passenger cars, each being ideal in an environment of sustained higher gas prices (which we may be looking at). Ford especially is really playing up its pickup truck bonafides.
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Why the market is selling off, day two
Another surge in oil prices isn’t helping market sentiment this morning.
But remember in this backdrop, markets will tend to take their initial cues from the leaders running point on the war (Trump, Hegseth, etc.)
Helpful assessment of this from Mizuho today:
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Bank stocks and war against Iran
Good point by JP Morgan this morning on bank stocks.
Look for a first quarter lift to trading businesses from increased volatility across many markets:
“We see the events in the Middle East having limited direct earnings impact on global banks so far, as, despite being a growth region for most global diversified banks, the overall contribution from the Middle East to Group earnings is currently limited, we believe. As most global banks are wholesale geared rather than domestic retail in the region, we think the impact for global investment bank geared banks from higher volatility is likely to be positive for global trading revenues.”
Their top US names to trade off this include Goldman Sachs (GS) and Morgan Stanley (MS) given their outsized trading operations.
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Goldman Sachs looking for some oil driven inflation
Goldman Sachs calling attention to a pickup in inflation soon with oil prices surging.
Their team notes that a 10% increase in crude oil prices increases core inflation by four basis points and headline inflation by 20-30 basis points.
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Reminder on market pullbacks
It’s good in these moments, when the market has been punched in the face, to level-set a bit.
Pullbacks on developing war news is normal. But just keep this chart from Keith Lerner at Truist in mind.
Since 2009, the S&P 500 (^GSPC) has seen more than 30 pullbacks of greater than 5%. That suggests stocks can end up resilient in the face of bad news.
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Oil rally builds as ‘staggering’ Middle East War Jolts Energy
Crude oil futures (BZ=F, CL=F) continued to rise on Tuesday as fresh Mideast strikes spurred concerns that hostilities could disrupt key supply routes and reignite inflation pressures.
Bloomberg reports:
Oil extended gains as the US and Israel stepped up their war against Iran, while Tehran vowed a full closure of the Strait of Hormuz and hit the American embassy in Riyadh with drones.
Global benchmark Brent rose above $80 a barrel, after spiking about 7% on Monday, while West Texas Intermediate was near $73. President Donald Trump said the US would do “whatever it takes,” and Secretary of State Marco Rubio told reporters the military campaign was set to intensify.
… Global energy markets have been upended by the war, which erupted on Saturday and then spread across the oil-rich Middle East as Iran sought to retaliate against Israel and states hosting US forces. Oil prices have spiked, along with natural gas and petroleum products such as diesel, potentially fueling a wave of inflation across the world. Coal has also jumped.
“With the Strait of Hormuz still inactive, the clock is ticking,” JPMorgan Chase & Co. analysts including Natasha Kaneva said in a note, flagging scope for some Persian Gulf producers to cut output within weeks if storage fills.
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Korean stocks suffer worst sell-off since 2024 on Iran war risks
Bloomberg reports:
South Korean stocks slumped as Middle East tensions stoked concern over the impact of rising energy costs, with global funds offloading more than $3 billion of local equities amid a wave of risk-off sentiment.
The benchmark Kospi (^KS11) sank 7.2% in its worst session since August 2024, as the market reopened after a holiday. Chip heavyweights Samsung Electronics Co. (005930.KS) and SK Hynix Inc. (000660.KS) dragged the gauge lower, dropping at least 9.9% each.
A prolonged war could be a major test of the world-beating rally in Korean equities, with the Kospi still up 37% this year. Samsung and SK Hynix powered much of the gains on the back of surging global memory amid the artificial intelligence boom. Tuesday’s drop shaved around $170 billion in combined market cap from the duo, unnerving investors who had jumped into the rally betting the gains will extend.
“An extended conflict involving Iran risks keeping crude prices elevated, reinforcing upside inflation risks and complicating the Federal Reserve’s path toward policy easing,” said Jung In Yun, chief executive officer at Fibonacci Asset Management Global.
“That macro backdrop is weighing on AI-linked equities, where stretched valuations are increasingly sensitive to shifts in rates and liquidity expectations.”
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Gold rises for fifth-straight day as investors move to risk-off assets
Bloomberg reports:
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Sam Altman announces amendments over OpenAI deal with Pentagon
Reuters reports:
