US stock futures were trading lower on Tuesday, 8 September, as the escalating conflict in the Middle East pushed oil prices higher and fuelled inflation fears ahead of the US Federal Reserve’s upcoming policy meeting.
The S&P 500 was set to open 0.4% lower at the start of a holiday-shortened US trading week. Dow Jones Industrial Average futures fell 0.7%, while Nasdaq futures were also down marginally.
Rising tensions in the Middle East are casting a shadow over the better-than-expected performance of US tech heavyweights in the second quarter. Traders’ attention has now shifted to the upcoming August inflation data, due on Friday, 11 September, following a stronger-than-expected jobs report.
Data released on Friday showed that US nonfarm payrolls rose by 162,000 in August, following a revised increase of 23,000 in July and comfortably exceeding forecasts for a gain of 56,000. The unemployment rate held steady at 4.1%, in line with expectations.
Following the stronger-than-expected report, markets scaled back expectations of interest rate cuts by the Fed. Traders were pricing in about a 60% chance of a quarter-percentage-point rate cut at the central bank’s 15-16 September policy meeting, according to the CME Group’s FedWatch tool.
Meanwhile, bond yields remained elevated as traders demanded higher compensation amid rising inflation concerns and widening government deficits. The benchmark 10-year Treasury yield last week climbed to its highest level since November 2023, while the shorter-term two-year Treasury yield rose to its highest level since January 2025.
Early Tuesday, the US dollar slipped to 153.86 Japanese yen from 154.34 yen. The yen has strengthened against the dollar in recent days on expectations that Japanese authorities could intervene to prevent the currency from weakening further. Last week, the dollar briefly rose to around 160 yen.
Brent crude nears $100
Brent crude, the global oil benchmark, reached $99.50 a barrel in trade after Saudi Arabia said operations at facilities in the kingdom’s south had been halted following attacks. The attacks early Tuesday marked a major escalation in the renewed conflict between a key US ally and Iranian-backed rebels in Yemen.
Strong Chinese purchases also added to tightness in the oil market. US benchmark crude surged 2.5% to $93.79 a barrel.
Iran said a deal with Oman to manage shipping through the Strait of Hormuz was imminent, raising questions over how the US would respond after striking Iranian vessels over the weekend. Tehran also warned that ships could face the risk of attack near Oman’s coastline.
Earlier, in late August, Iran and Oman announced that they had reached an understanding on how revenues from the Strait of Hormuz would be shared.
Stocks in focus
Roivant Sciences shares rallied 24% in pre-market trade after the pharma company reported positive Phase 2 trial results for subsidiary Pulmovant’s mosliciguat in patients with pulmonary hypertension associated with interstitial lung disease.
Lockheed Martin gained 0.7% after UBS upgraded the defence contractor to ‘Buy’ from ‘Neutral’, citing underappreciated earnings growth potential.
Novartis plunged 12% after Phase 3 results showed its del-desiran drug failed to deliver a significant improvement in patients with myotonic dystrophy type 1, CNBC reported.
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