U.S. stock index futures slipped on Monday after fresh American strikes on Iranian targets sent crude oil sharply higher, and traders raised the odds of a Federal Reserve rate hike following Chair Kevin Warsh's Jackson Hole address. The S&P 500, Dow and Nasdaq 100 all edged lower as investors weighed geopolitical risk against a hawkish rate outlook.
S&P 500 futures fell 0.13% to 7,701 points. Dow Jones Industrial Average futures slipped 0.19% to 53,484 points. Nasdaq 100 futures hovered near the flatline at 29,506 points, anchored by lingering weakness in rate-sensitive technology and semiconductor shares.
The early-week pullback follows a choppy Friday session, where equity indexes surrendered early gains as bond yields surged in response to Warsh's warnings that the U.S. central bank still has significant work ahead to bring inflation back to its 2% target.
Middle East strikes spike oil prices
A military escalation over the weekend drove the risk-off tone across markets. U.S. forces launched targeted air strikes against two Iranian missile launchers on Larak Island in the Strait of Hormuz — the first direct American action against Iranian territory since July, despite recent signals from Washington that it intended to shift toward economic pressure through trade sanctions.
Tehran responded with retaliatory strikes aimed at U.S. military positions in Jordan. Tension deepened further after President Donald Trump warned in a social media post of potential action against Iran's Kharg Island oil export terminal, while Treasury Secretary Scott Bessent pledged additional tariff measures.
As a result, global crude oil benchmarks surged nearly 3% past $90 a barrel, dismantling hopes of a quick diplomatic resolution over shipping through the Strait of Hormuz and reigniting cost-push inflation fears across global supply chains.
Warsh's hawkish pivot lifts Fed hike odds to 60%
Beyond the geopolitical crosswinds, equities also face pressure as money markets recalibrate the monetary policy outlook ahead of a heavy week of economic data. During his inaugural keynote at the Jackson Hole symposium on Friday, Fed Chair Kevin Warsh reinforced the central bank's commitment to taming persistent price pressures.
Warsh avoided explicit forward guidance, but institutional desks read his remarks as an acknowledgment that further rate hikes remain on the table. Traders now price in a nearly 60% probability of a 25-basis-point hike at the Fed's Sept. 16 meeting, up from roughly 35% before Warsh's speech, according to the CME FedWatch tool. Benchmark Treasury yields pushed higher across the curve, undercutting high-valuation mega-cap growth and semiconductor names that bore the brunt of Friday's selloff.
Payrolls week ahead
Trading desks are bracing for a data-heavy week to gauge the labor market and inflation. Market focus turns to Friday's August nonfarm payrolls report, expected to show a modest hiring recovery after a low-hire, low-fire summer. Investors will also digest July JOLTS job openings data on Tuesday and August ADP private payrolls on Wednesday.
Fed Governors Michael Barr and Christopher Waller are scheduled to speak Tuesday and Thursday, respectively, and will be watched closely to confirm whether Warsh's hawkish stance commands broad support among voting FOMC members. Their remarks land ahead of the decisive August CPI print on Sept. 11.
Source: Investing.com
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