U.S. Attacks On Iran May Spark Early Sell-Off On Wall Street

The major U.S. index futures are currently pointing to a sharply lower open on Monday, with stocks likely to extend the notable downward move seen over the two previous sessions.

The downward momentum on Wall Street comes after the U.S. and Israel launched joint strikes against Iran over the weekend, killing Iranian Supreme Leader Ayatollah Ali Khamenei

The conflict in the region escalated further today after Israel launched airstrikes on Hezbollah targets in Beirut and other parts of Lebanon following projectile fire from Lebanese territory into northern Israel.

President Donald Trump suggested the conflict with Iran could go on for the next four weeks, raising concerns about a significant widening of hostilities in the region.

The attacks have led to a spike in the price of crude oil, potentially adding to recent concerns about the outlook for inflation.

“Scenes in the Middle East have caused widespread nervousness across financial markets,” said Dan Coatsworth, head of markets at AJ Bell. “The U.S. attacks on Iran have caused oil prices to soar amid fears of disruptions to supplies, pushing up costs for businesses and consumers.”

He added, “If the issues persist then the market will start to worry about new inflationary pressures and that could lower expectations for near-term interest rate cuts.”

Stocks moved notably lower during trading on Friday, extending the pullback seen during Thursday’s session. The major averages all moved to the downside, with the tech-heavy Nasdaq adding to the steep loss posted on Thursday.

The major averages ended the day well off their lows of the session but still in negative territory. The Dow slumped 521.28 points or 1.1 percent to 48,977.92, the Nasdaq slid 210.17 points or 0.9 percent to 22,688.21 and the S&P 500 fell 29.98 points or 0.4 percent to 6,878.88.

For the week, the Dow tumbled by 1.3 percent, the Nasdaq slumped by 1.0 percent and the S&P 500 decreased by 0.4 percent.

The continued weakness on Wall Street came following the release of a Labor Department report showing producer prices in the U.S. increased by more than expected in the month of January.

The report said the Labor Department’s producer price index for final demand climbed by 0.5 percent in January after rising by a downwardly revised 0.4 percent in December.

Economists had expected producer prices to rise by 0.3 percent compared to the 0.5 percent increase originally reported for the previous month.

The Labor Department also said the annual rate of producer price growth edged down to 2.9 percent in January from 3.0 percent in December. Economists had expected yearly growth to slow to 2.8 percent.

“For the past month the market has been worried about AI disruption and its impact on the labor market, so inflation hasn’t been top of mind,” said Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management.

He continued, “But this morning’s inflation readings could give the Fed another reason to be more patient with rate cuts and wait until the second half of the year before making any changes.”

The bigger than expected monthly increase in producer prices along with concerns about AI-related layoffs may have led to worries about a period of stagflation.

Adding to recent concerns about potential AI disruptions, Block (XYZ) said it is cutting its workforce by nearly half.

Block CFO Amrita Ahuja said the payments company sees an “opportunity to move faster with smaller, highly talented teams using AI to automate more work.”

Airline stocks showed a substantial move to the downside on the day, resulting in a 5.0 percent nosedive by the NSYE Arca Airline Index. The index ended the session at its lowest closing level in almost a month.

Significant weakness was also visible among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index plunging by 4.9 percent and 3.0 percent, respectively.

Software and semiconductor stocks also saw notable weakness, while pharmaceutical, retail and telecom stocks showed strong moves to the upside.

Other Markets

Commodity, Currency Markets

Crude oil futures are soaring $5.47 to $72.49 a barrel after surging $1.81 to $67.02 a barrel last Friday. Meanwhile, after jumping $53.70 to $5,267.20 an ounce in the previous session, gold futures are spiking $170.80 to $5,418.70 an ounce.

On the currency front, the U.S. dollar is trading at 157.43 yen versus the 156.03 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1707 compared to last Friday’s $1.1813.

Asia

Asian stocks drifted lower on Monday as investors closely monitored escalating West Asian tensions. The conflict in the region escalated further today after Israel launched airstrikes on Hezbollah targets in Beirut and other parts of Lebanon following projectile fire from Lebanese territory into northern Israel.

U.S. President Donald Trump suggested the conflict with Iran could go on for the next four weeks, raising concerns about a significant widening of hostilities in the region that could severely disrupt the global supply of crude oil and send prices soaring to levels not seen in years.

Barclays has warned that Brent crude prices could reach $100 a barrel in the event of a material supply disruption.

The dollar strengthened in Asian trade whiling, gold jumped more than 2 percent to trade above $5,400 an ounce as the Middle East conflict triggered a broad retreat from risk assets.

Oil prices soared almost 9 percent after at least three ships were attacked near the Strait of Hormuz, which is crucial for the flow of oil to the rest of the world.

Chinese stocks bucked the weak regional trend, with the benchmark Shanghai Composite index rising 0.5 percent to 4,182.59 as national lawmakers and political advisors gather for a key strategic session.

There are expectations of targeted fiscal stimulus from the upcoming National People’s Congress.

Hong Kong’s Hang Seng index plunged 2.1 percent to 26,059.85, with technology and consumer discretionary stocks leading losses.

Japanese markets lost ground due to uncertainty over the Bank of Japan’s policy outlook, increasing anxieties over artificial intelligence and rising concerns about the lack of transparency in private lending.

The Nikkei 225 Index slumped 2.4 percent to 58,057.24, with air transportation, securities house shares and banks leading declines. The broader Topix index settled 1.02 percent lower at 3,898.42.

Seoul markets were closed for a local holiday. Australian markets recovered from an early slide to end on a flat note as geopolitical uncertainty helped spur demand for gold and energy stocks.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index dipped 0.5 percent to 13,656.65, snapping a two-day winning streak.

Europe

European stocks are deep in the red on Monday as a broadening Middle East conflict dented investors’ appetite for riskier assets.

Inflation worries returned to the fore as Brent crude prices soared nearly 10 percent to their highest level since January 2025 on fears of supply disruptions from the Middle East.

All eyes are on the status of the Strait of Hormuz, which is crucial for the flow of oil to the rest of the world.

In economic news, German retail sales fell more than expected in January, while British house prices rose slightly faster than expected last month after a dip at the end of 2025, separate reports showed.

The German DAX Index is down by 2.6 percent, the French CAC 40 Index is down by 2.2 percent and the U.K.’s FTSE 100 Index is down by 1.5 percent.

Banks led losses, with Commerzbank, Deutsche Bank, BNP Paribas and Barclays falling sharply due to rising concerns about the lack of transparency in private lending.

British engineering firm Senior has also shown a notable move to the downside after its 2025 revenue came in below expectations.

Medical products maker Smith & Nephew has also plummeted despite reporting higher profits and cash flow for 2025.

Meanwhile, Bunzl has advanced after the business supplies distributor reported 3.0 percent revenue growth at constant exchange rates in 2025, driven by acquisitions.

Sage Group shares were modestly higher. The software company said that it is launching a share repurchase program to repurchase up to GBP 300 million.

U.S. Economic News

The Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of February at 10 am ET.

The ISM’s manufacturing PMI is expected to edge down to 51.8 in February after jumping to 52.6 in January, but a reading above 50 would still indicate growth.