U.S. stock futures slide as Iran-related concerns trigger a volatile session on Wall Street

U.S. equity index futures declined Monday evening, pulling back as renewed tensions among the United States, Israel, and Iran fueled fresh volatility across Wall Street.

Earlier in the day, U.S. markets staged a sharp recovery from significant intraday losses to close slightly higher. The rebound was supported by solid business activity data, while technology stocks attracted bargain hunters following steep declines in February.

Investor attention remained firmly fixed on escalating Middle East tensions, as leaders from Washington, Tel Aviv, and Tehran showed no indication of de-escalating the conflict. Weekend strikes by the U.S. and Israel on Iran prompted swift retaliation from Tehran, intensifying geopolitical risks.

By 20:00 ET (01:00 GMT), S&P 500 futures were down 0.3% at 6,867.0. Nasdaq 100 futures slipped nearly 0.4% to 24,922.25, while Dow Jones futures declined 0.3% to 48,807.0.

Wall Street swings sharply amid US-Iran tensions

Major U.S. indices ultimately finished modestly higher on Monday after rebounding from earlier session lows, though market sentiment remained fragile as the regional conflict deepened.

Technology stocks led the gains, particularly semiconductor names, which recovered after notable February losses. Nvidia surged 2.9% following a 7.3% decline the previous month.

The S&P 500 closed essentially unchanged, the Dow Jones Industrial Average edged down 0.2%, and the Nasdaq Composite rose 0.4%. Market volatility remained elevated, with the CBOE Volatility Index jumping nearly 8%.

Hostilities continued into Monday, with the U.S. signaling no intention to halt its military actions. Iran responded with drone and missile strikes targeting Israel and nearby regions, while senior Iranian officials reiterated that negotiations with Washington were not under consideration.

Markets grew increasingly concerned about the inflationary implications of the conflict, particularly as oil prices surged. A prolonged rise in crude could reignite global inflationary pressures and prompt central banks to adopt a more hawkish stance.

ANZ analysts noted that higher oil prices represent a negative supply shock, increasing inflation while weighing on growth prospects. They emphasized that the broader economic impact will largely depend on the duration of the conflict.

U.S. PMI data exceeds expectations

Meanwhile, February U.S. purchasing managers’ index data came in stronger than expected, according to ISM figures released Monday.

Manufacturing activity expanded for a second consecutive month, with new orders significantly outperforming forecasts. However, the report also showed a sharp increase in manufacturing input prices, even before factoring in potential energy-related shocks stemming from Middle East tensions.

The data followed last week’s stronger-than-expected producer price figures for January, reinforcing concerns that inflation may remain sticky. As a result, investors are increasingly wary that the Federal Reserve could maintain interest rates at elevated levels for longer than previously anticipated.

Several Federal Reserve officials are scheduled to speak in the coming days, which may provide further guidance on the future path of monetary policy.

Sources: Ambar Warrick