U.S. stock futures tumbled in premarket trading Monday as global oil prices soared amid signs that U.S.-Israel military strikes in Iran were expanding across the region, raising concerns about potential disruptions to global petroleum supplies.
Futures for the S&P 500 and Dow Jones Industrial Average sank 1.1% in premarket trading, while the Nasdaq Composite sank 1.6%. Oil prices rose sharply as Brent crude, the international price benchmark for crude, jumped nearly 9% to $79.31 per barrel on Monday, its highest point in more than a year.
Wall Street analysts warned on Monday that the growing conflict could disrupt global oil shipments, with roughly 20% of the world’s supply moving through the Strait of Hormuz, the narrow mouth of the Persian Gulf. Any interruption would likely lift crude prices, driving up gasoline costs for U.S. consumers and raising energy expenses for businesses, according to economists.
“Oil and gas tanker traffic through the Strait of Hormuz has ground to a near halt, satellite data show, as oil firms and trading houses have put voyages on hold out of fear that Iran might target vessels passing through this maritime choke point,” Eurasia Group analysts said in a March 1 research note.
They added that even a break of a few days for oil deliveries through the Strait of Hormuz “would cause a significant disruption to global supply.”
Iran exports roughly 1.6 million barrels of oil a day, mostly to China. It may need to look elsewhere for supply if Iran’s exports are disrupted, another factor that could increase energy prices.
Also hurting the broad market was a report Friday showing that inflation at the U.S. wholesale level was at 2.9% last month, much higher than the 1.6% that economists expected.
That could pressure the Federal Reserve to hold off longer on its cuts to interest rates. Lower rates would give the economy and prices for investments a boost, but they risk worsening inflation.