U.S. stock futures were little changed late Monday after a broad market selloff driven by renewed fears that tensions in the Middle East could spiral into a deeper regional conflict, threatening global energy supplies and reigniting inflation concerns across financial markets.
Futures tied to the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 all hovered near flat levels in overnight trading, suggesting investors were attempting to stabilize sentiment after a volatile regular session in which geopolitical anxiety overshadowed otherwise resilient corporate fundamentals.
The muted overnight moves followed a sharp decline on Wall Street Monday, with the Dow Jones Industrial Average falling 557.37 points, or 1.13%. The S&P 500 lost 0.41%, while the Nasdaq Composite slipped 0.19%, outperforming broader indexes as investors continued rotating toward technology and artificial intelligence-linked companies viewed as relatively insulated from geopolitical shocks.
The latest wave of volatility was triggered after the United Arab Emirates accused Iran of launching missile and drone attacks against the Gulf state, further straining an already fragile ceasefire framework involving Tehran and Washington.
The renewed confrontation revived fears that the conflict could once again disrupt shipping routes and oil infrastructure across the Gulf, particularly around the Strait of Hormuz, the critical maritime chokepoint through which roughly one-fifth of global oil supplies move.
The U.S. military added to the tension after reports emerged that American naval forces had engaged Iranian vessels near the strait. Adm. Brad Cooper, commander of U.S. Central Command, said American forces had “eliminated six small Iranian boats” that were allegedly attempting to interfere with commercial shipping operations.
Iranian state media denied the claims, underscoring the fog of information surrounding the rapidly evolving conflict. The geopolitical uncertainty initially pushed oil prices higher during Monday’s regular trading session, amplifying investor concerns that prolonged instability in the Gulf could deepen the ongoing global energy shock already tied to the war.
However, crude prices eased slightly in extended trading, with U.S. West Texas Intermediate crude futures falling about 1% to $105.39 a barrel, suggesting traders remain uncertain about whether the latest escalation will materially worsen supply disruptions in the near term.
However, analysts warn that energy markets remain extremely vulnerable to sudden spikes, particularly if attacks intensify around shipping infrastructure or if Hormuz remains partially constrained for an extended period.
The market reaction highlighted a broader tension currently shaping global investing: whether the enormous momentum behind artificial intelligence, strong corporate earnings, and resilient consumer demand can continue to offset mounting geopolitical and macroeconomic risks.
So far, many investors appear to believe the answer is yes. Morgan Stanley Wealth Management’s head of market research and strategy, Dan Skelly, argued Monday that markets have increasingly learned to treat geopolitical flare-ups as temporary disruptions rather than long-term structural threats.
“You’ve seen this pattern before where — last year in April, with Liberation Day — big sell-off, big recovery,” Skelly said on CNBC’s “Closing Bell: Overtime.”
“Now with the war in the Middle East, it’s almost like the market is treating geopolitics and some of these domestic policy shocks like pop-up ads along a longer, winding narrative centered on AI, the economy and resilient earnings,” he added.
That assessment indicates how dramatically investor psychology has shifted over the past year. While wars, inflation spikes, and trade disruptions continue to generate short-term volatility, capital markets remain heavily focused on the AI investment cycle, which is driving unprecedented spending on data centers, semiconductors, cloud computing, and digital infrastructure.
Technology companies tied to artificial intelligence have become the market’s dominant growth engine, helping support major indexes even as geopolitical tensions intensify. The Nasdaq’s relatively smaller decline on Monday compared with the Dow reflected that dynamic. Investors continued to gravitate toward megacap technology names viewed as beneficiaries of the AI boom, while economically sensitive sectors tied to industrial activity, transportation, and consumer spending faced heavier pressure.
At the same time, the conflict’s inflationary implications remain a growing concern for policymakers and investors alike. Rising oil prices threaten to complicate the Federal Reserve’s efforts to maintain progress on inflation while supporting economic growth. Higher fuel costs can quickly ripple through transportation, manufacturing, and consumer goods pricing, raising fears of a second inflation wave at a time when borrowing costs remain elevated.
That backdrop makes this week’s economic data especially important. Investors are closely watching Tuesday’s release of the U.S. trade deficit report and the latest Job Openings and Labor Turnover Survey, commonly known as JOLTS, for signs of whether the labor market and broader economy remain resilient under mounting geopolitical pressure.
Corporate earnings will also remain in focus, with major companies including Pfizer, DuPont, PayPal, HSBC, Anheuser-Busch InBev, Marathon Petroleum, Duke Energy, and Shopify scheduled to report results before Tuesday’s opening bell.
Those earnings reports are expected to provide further insight into how companies are navigating an increasingly complex operating environment shaped by war-driven energy volatility, supply chain uncertainty, and continued heavy investment in AI infrastructure.
