Dow futures fall as oil nears $100, Iran war fuels inflation fears

US stock index futures moved lower on Thursday as a renewed surge in oil prices heightened inflation concerns and forced investors to reassess expectations for interest rate cuts from the Federal Reserve.

The decline in futures came after reports of further attacks on oil tankers in the Middle East, which raised fears of escalating supply disruptions and prolonged geopolitical instability in the region.

Dow E-mini futures were down 316 points, or 0.67%, while S&P 500 E-minis fell 36.75 points, or 0.54%. Nasdaq 100 E-minis also dropped 121.75 points, or 0.49% in early trading.

Oil surge rattles markets and fuels inflation concerns

Oil prices climbed sharply following reports that two tankers were set ablaze in Iraqi waters after apparent Iranian strikes.

The attacks are part of a broader wave of disruptions targeting oil and transport facilities across the Middle East.

Brent crude briefly surged toward $100 per barrel, while West Texas Intermediate futures traded higher by 5% as markets reacted to supply disruption risks.

Iran has warned that oil prices could climb even further, potentially reaching $200 per barrel.

The spike in energy prices comes despite efforts by policymakers to stabilize markets.

The United States said it would release 172 million barrels of crude from the Strategic Petroleum Reserve as part of an international effort coordinated with the International Energy Agency.

The IEA earlier agreed to release 400 million barrels of oil from emergency reserves, marking the largest coordinated release in its history.

However, markets remain skeptical about whether these measures can offset supply disruptions tied to the ongoing conflict.

Airlines and travel stocks under pressure

Companies sensitive to energy prices were among the biggest losers in premarket trading.

S&P 500 airline stocks are on track for their biggest monthly losses in a year as higher fuel costs threaten profitability.

American Airlines fell 1.8% in premarket trading while Southwest Airlines plunged 2.53%.

Cruise operators Norwegian Cruise Line declined 1.8% and Royal Caribbean was down by more than 2%.

Energy companies, however, moved slightly higher as oil prices rose. Shares of Occidental Petroleum gained by 1.8% and EQT Corporation rose 0.6% in pre market.

Wall Street’s volatility gauge also rose as investors braced for further market turbulence.

The CBOE Volatility Index increased to 25.53.

Meanwhile, futures tied to the rate-sensitive Russell small-cap index fell more than 1%.

Rate cut expectations and policy risks shift

The surge in oil prices is complicating expectations that the Federal Reserve may soon begin cutting interest rates.

Goldman Sachs has pushed back its forecast for the Fed’s next rate cut to September from its earlier projection of June.

Money market futures now indicate traders expect only one quarter-point rate cut by December, compared with two cuts previously priced in before the escalation of the conflict.

Investors are also monitoring a series of other developments affecting market sentiment.

Washington announced new trade investigations targeting industrial overcapacity and forced labor across 16 major trading partners, a move seen as an attempt to rebuild tariff pressure after the US Supreme Court struck down a key part of President Donald Trump’s tariff program.

At the same time, scrutiny is growing around the $2 trillion private credit industry after several credit issues emerged in recent months.

Morgan Stanley limited redemptions at one of its private credit funds, while JPMorgan reduced the value of some loans to private credit funds.

Shares of Blackstone fell 1.1% in premarket trading, while Blue Owl declined nearly 3%.

Not all companies moved lower. Bumble surged 25% after the dating app operator reported fourth-quarter revenue above analysts’ estimates.

Later in the day, investors will focus on weekly jobless claims data and comments from Federal Reserve Vice Chair for Supervision Michelle Bowman.

Markets are also awaiting Friday’s release of the personal consumption expenditure index, the Fed’s preferred gauge of inflation.