US stock futures fell sharply on Sunday night after Donald Trump announced a blockade of the Strait of Hormuz, following the breakdown of peace talks between the United States and Iran over the weekend.
Futures tied to the Dow Jones Industrial Average dropped 462 points, or 1%, while S&P 500 futures fell 1% and Nasdaq 100 futures declined 1.1%, pointing to a weaker start to the week on Wall Street.
The move follows a strong prior week, when hopes for a ceasefire supported gains across equities. The S&P 500 rose 3.6%, while the Nasdaq Composite climbed about 4.7% and the Dow gained 3%, marking their strongest weekly performances since November.
Sentiment shifted after negotiations in Islamabad failed to produce an agreement. US officials indicated talks may resume in coming days, though positions remain far apart, with Iran reportedly seeking control of the Strait, reparations and the release of frozen assets.
The blockade announcement has added another layer of uncertainty, with markets assessing whether it represents a negotiating tactic or a longer-term policy shift.
Oil and macro
Oil prices surged in early trading, reflecting heightened concerns over supply disruptions. West Texas Intermediate crude jumped 8.5% to US$104.76 a barrel as markets reacted to the proposed blockade.
Investors are also turning their attention to the start of US earnings season, with major banks including Goldman Sachs, JPMorgan Chase and Morgan Stanley set to report results.
Australian Market Outlook
Australian shares are set to open higher despite renewed geopolitical tensions, with S&P/ASX 200 futures pointing to a 0.8% gain.
The local market is coming off a strong week, with the ASX 200 rising 4.4% following the announcement of a temporary ceasefire. Futures suggest the index could move back above the 9,000 level.
