Oil Surge, Rate Hike Bets Send US Stock Futures Lower
US stock futures dipped ahead of Monday's open as oil prices surged due to renewed fighting between the US and Iran, while traders increased their bets on a September interest rate hike.
The Dow Jones Industrial Average futures lost around 64 points, or 0.12%, with S&P 500 futures slipping about 0.1%.
Brent crude rose approximately 2% at the open and traded near $90.69 a barrel, up close to 3% on the day. This puts the global benchmark roughly 8% higher over the past month and about 33% above its year-ago price.
The trigger was military action, with US forces striking Iranian rocket launchers on Larak Island in the Strait of Hormuz on Sunday, prompting Iran to retaliate with missiles and drones aimed at American airbases in Jordan and the UAE.
Although oil prices jumped significantly, they are currently pricing a risk of closure rather than an actual closure, as around six to eight million barrels per day still flow through the strait.
The second major story is the Federal Reserve's potential interest rate hike. Fed Chair Kevin Warsh's speech at Jackson Hole on Friday landed more hawkishly than markets expected, with him expressing concerns about inflation and implying policy may need to respond if it doesn't improve.
Traders quickly repriced their bets, now indicating a 60% chance of a quarter-point increase in September, up from around 35% before Warsh spoke.