Dow futures tumble as oil surge rattles markets on Iran war

US stock index futures fell sharply on Tuesday as investors weighed the economic fallout of escalating conflict between the United States and Iran, rising oil prices, and renewed inflation risks.

Futures tied to the Dow Jones Industrial Average dropped as much as 822 points, or roughly 1.68%, while S&P 500 futures also fell by 1.6%.

Nasdaq 100 futures led losses, falling around 2.16% in premarket trading.

The moves followed reports that the US embassy in Riyadh had been struck by drones and warnings from President Donald Trump that the conflict could continue for more than four weeks.

Over the weekend, joint US-Israeli military strikes killed Supreme Leader Ayatollah Ali Khamenei.

Oil surge fuels inflation concerns

Energy markets were at the center of investor anxiety.

Brent crude surged 9% and briefly hit $85 while West Texas Intermediate futures gained more than 8% as fears mounted that disruptions could spread across the Middle East.

Tehran threatened to attack any vessel attempting to transit the Strait of Hormuz, a critical chokepoint that carries roughly one-fifth of the world’s total oil consumption.

An Iranian Revolutionary Guard commander said the strait is closed and that Iran would set ablaze ships attempting the route, a Reuters report said, citing Iranian media.

Higher shipping rates and production halts by several Middle Eastern oil and gas producers added to the pressure.

Investors worried that a prolonged surge in crude could stoke inflation across the broader economy and complicate policy decisions for central bank officials already contending with tariff-driven price pressures.

The US 10-year Treasury yield touched its highest level in more than a week, while traders pushed back expectations for a 25-basis-point Federal Reserve rate cut to September from July, according to LSEG data.

Tech stocks and growth names retreat

Technology stocks, which had rallied in the prior session, moved lower.

Nvidia fell 2.9% and Microsoft declined 1.64%.

Memory-chip names cooled after a strong February rally, with Sandisk down 6.8% and Western Digital losing 4.58%.

MongoDB plunged 26.9% after forecasting quarterly profit below Street estimates.

Industries sensitive to fuel costs also came under pressure.

Delta Air Lines and Royal Caribbean each fell about 3% as crude prices climbed for a second straight day.

Meanwhile, the CBOE Volatility Index spiked to a fresh three-month high of 26.99, signaling elevated market stress.

Futures tracking small-cap stocks slid 2.41%.

Defensive sectors and earnings in focus

Oil, gas and defense companies were among the few gainers. Occidental Petroleum rose 3.3%, Cheniere Energy climbed 8.2%, Lockheed Martin added 0.99% and AeroVironment gained 3.45%.

Traditional safe havens such as precious metals declined amid a stronger dollar, dragging down US-listed miners including Sibanye Stillwater and Gold Fields by 13% and 10%, respectively.

Despite the sharp drop in futures, Carson Group chief market strategist Ryan Detrick struck a measured tone.

Investors are also monitoring corporate earnings.

Target rose more than 3.4% in premarket trading after reporting adjusted earnings of $2.44 per share, topping expectations of $2.16.

Revenue of $30.45 billion was just below consensus, while CEO Michael Fiddelke described sales turning positive year over year in January as an “important milestone on our path back to growth this year.”