US stock market: Dow, S&P 500 futures slide over 1% as war-driven oil rally raises inflation fears

The US stock market is likely to open with deep cuts in Monday's trading session, March 9, as futures of the three key averages — the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite — are trading lower by 1%, 1.1%, and 1%, respectively, in pre-market trade, as the ongoing conflict exacerbates inflation fears.

US equities oscillated between losses and gains through last week, reacting to headlines of strikes between the US and Iran. The tensions are now expected to last longer than initially anticipated, with analysts warning that the situation could keep stocks under prolonged pressure.

The US-Israel war with Iran has entered its second week, with Iranian missiles raining down on Gulf states while Israel has attacked critical infrastructure in Tehran, pushing crude oil prices to a four-year high.

While missiles continue to enter each other's territory, statements from both nations indicate that the war could persist, as neither side appears willing to step back even as the death toll in the region continues to rise.

Supply fears and crude spike

Supply fears are keeping crude oil prices elevated, with Brent crude oil futures reaching $120 per barrel for the first time since June 2022. However, prices moderated after the Financial Times reported that some members of the Group of Seven industrial nations were considering releases from strategic oil reserves to ease pressure on the markets.

The unconfirmed report cited unnamed people familiar with the talks.

The spike in energy costs has amplified concerns that interest rates could remain elevated for longer, with the yield on the benchmark 10-year Treasury note touching its highest level in more than a month, according to Reuters.

Iraq, Kuwait, and the UAE have reportedly cut oil production as storage tanks fill due to the reduced ability to export crude. Iran, Israel, and the United States have also attacked oil and gas facilities since the war started, worsening supply concerns.

On Saturday, President Donald Trump downplayed the idea of tapping America’s Strategic Petroleum Reserve, saying US supplies were ample and prices would soon fall.

Recent labour market data has already rattled investors, with the economy unexpectedly shedding jobs in February and the unemployment rate rising. This, combined with surging oil prices, could leave the Federal Reserve in an increasingly difficult position, complicating the path toward rate cuts.

Investors eye packed economic calendar with inflation in focus

Markets face a crucial week packed with high-stakes economic releases. Inflation data is due on Wednesday, followed by jobless claims, JOLTS figures, personal consumption expenditures data — the Fed’s preferred inflation gauge — and a second estimate of quarterly GDP later in the week.

The Fed’s next rate decision is due on March 18, and markets have nearly fully priced in expectations that policymakers will leave rates unchanged.

(With inputs from AP, Reuters)

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