US stock index futures edged lower on Monday as oil prices climbed above $109 a barrel after President Donald Trump issued an 8 p.m. ET Tuesday ultimatum for Iran to reopen the Strait of Hormuz, threatening unprecedented strikes on power plants and bridges if Tehran fails to comply. S&P 500 futures fell 0.28% to 6,603.75, while Nasdaq 100 futures slipped 0.2% to 24,175.75 by mid-evening trade, reversing gains from last week’s rally on de-escalation hopes.
Nasdaq 100 – 5 Days Chart
Market Snapshot
Risk assets retreated as geopolitical premiums surged back into energy markets. Brent crude (LCOc1) jumped 2.4% to $109.03 per barrel, hovering near session highs as traders priced in heightened supply disruption risks. Gold (XAUUSD) held firm at $4,634 an ounce, attracting safe-haven flows after falling more than 8% last month on dollar strength. The CBOE Volatility Index (VIX) ticked up toward 25, signaling renewed investor anxiety after dipping below 24 earlier in the session.
Treasury yields edged higher, with the 10-year note (US10Y) yielding 4.36%, up 4 basis points on the day, as inflation hedges and war premiums offset haven demand for bonds. The dollar index (DXY) remained bid, tracking near recent highs as investors sought liquidity amid escalating Middle East tensions.
Risk Flows
“The market was beginning to price in a diplomatic off-ramp last week, but this ultimatum resets the risk premium instantly,” said a New York-based macro strategist at a major hedge fund, speaking on condition of anonymity. “Energy is the first line of defense here, but if strikes hit Tuesday night, we could see a broader de-risking across equities and credit.”
Equity traders noted that last week’s gains, Dow up 3%, S&P 500 up 3.4%, Nasdaq up 4.4%, are now under threat as escalation fears return. “We bought the dip Friday on ceasefire hopes. Now we’re unwinding that into this deadline,” said a Chicago futures desk head. “The 6,600 level on S&P futures is key. A break below opens 6,500 fast.”
Macro Implications
A sustained closure of Hormuz, through which roughly 20% of global oil supply passes, would send Brent well above $120 a barrel within days, reigniting inflation pressures just as the Federal Reserve weighs its next policy move. Core PCE data due later this week will now be scrutinized for any pass-through effects from energy costs, potentially complicating the Fed’s rate-cut calculus.
“Oil at $110-plus changes the inflation narrative quickly,” the macro strategist added. “Markets were pricing two cuts this year. At these levels, one cut looks optimistic.”
