U.S. Stock futures tumbled Sunday evening as investors reacted to a major military operation launched by the United States and Israel against Iran, an action that President Donald Trump announced Saturday, confirming the death of Iran’s Supreme Leader Ayatollah Ali Khamenei.
Futures tied to the Dow Jones industrial average were down 368 points, or 0.72%, while S&P 500 futures fell 0.53% and Nasdaq futures lost 0.54%. The selloff reflects growing concerns about potential disruptions to global oil supplies and broader regional instability. U.S. Oil futures jumped 6.1% to $71.12 a barrel, and Brent crude gained 6.6% to $77.56. Earlier Sunday, Brent prices had surged 10% to approximately $80 a barrel in over-the-counter trading, according to oil traders who spoke with Reuters.
The operation, dubbed “Epic Fury” by President Trump, comes after weeks of unsuccessful diplomatic negotiations between Washington and Tehran, according to POLITICO. Trump has indicated the conflict could be prolonged, stating on social media that bombing will continue “as long as necessary to achieve our objective of PEACE THROUGHOUT THE MIDDLE EAST AND, THE WORLD!” He also warned of further casualties, joining the first reported losses from the initial strikes.
A significant risk centers on the potential for Iran to disrupt shipping through the Strait of Hormuz, a critical waterway for global oil transport. Approximately 20% of the world’s oil passes through the strait. The Islamic Revolutionary Guards Corps has reportedly warned ships to avoid the area, and claimed Sunday to have struck three oil tankers with missiles. Even prior to that announcement, fear of attacks had already led to a freeze in ship traffic, with hundreds of tankers either dropping anchor or remaining stationary near the strait, according to shipping data compiled by Reuters.
Major shipping companies have suspended operations through the strait. Greece’s shipping ministry has advised vessels to avoid the Persian Gulf, the Gulf of Oman, and the Strait of Hormuz. Maersk, a global shipping giant, has suspended all vessel crossings until further notice. Analysts estimate that closure of the strait could drive oil prices to $100 per barrel.
The impact of a prolonged disruption would be particularly acute in Asia, which relies heavily on oil imports transported through the strait, according to Idanna Appio, a portfolio manager and senior analyst at First Eagle. Wood Mackenzie estimates that it could take several weeks for export flows to resume, even in an optimistic scenario involving cooperation from Tehran. Alan Gelder, a senior VP at Wood Mackenzie, drew a comparison to the immediate aftermath of Russia’s invasion of Ukraine in 2022, when oil prices reached $125 a barrel.
OPEC+ has agreed to boost oil production by 206,000 barrels a day in April, but the effectiveness of this measure is uncertain if the Strait of Hormuz remains closed, Gelder noted.
Safe-haven assets saw gains. Gold rose 2% to $5,353 per ounce, and silver climbed 1.9% to $95.06. The yield on the 10-year Treasury was flat at 3.964%. The U.S. Dollar was up 0.28% against the euro and the yen.
Early indications from Asian currency markets suggest investors are moving defensively, but not yet pricing in severe disruption, Appio said. The Australian dollar, often seen as a barometer of global risk sentiment, was down about 0.26%.
Regional sovereign risk is also elevated, as Iran has targeted Bahrain, Qatar, and the UAE with missiles and drones. However, Appio noted that most of those countries have strong balance sheets, potentially creating a buying opportunity for investors. The longer-term impact on regional risk remains uncertain.
Investors are also preparing for a busy week of economic data releases, including the Institute for Supply Management’s manufacturing activity index on Monday, ADP’s private-sector payrolls report and the Federal Reserve’s Beige Book on Wednesday, fourth-quarter productivity data on Thursday, and the Labor Department’s monthly jobs report on Friday.
