US Stock Futures Fall on Trump Escalation Threats: Markets Wrap

US equity-index futures dropped and oil climbed after US President Donald Trump’s warning that he may significantly escalate the war in Iran, potentially worsening an energy-price shock that’s already upending the global economic outlook.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — US equity-index futures dropped and oil climbed after US President Donald Trump’s warning that he may significantly escalate the war in Iran, potentially worsening an energy-price shock that’s already upending the global economic outlook.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.Futures contracts for the S&P 500 Index retreated 0.4% as trading started Monday. Brent crude oil rose 1% to $110 a barrel.Trump renewed threats early Sunday to attack Iranian infrastructure if the key energy-shipping route through the Strait of Hormuz remains closed. He followed it later with another that said: “Tuesday, 8:00 P.M. Eastern Time!” with no further explanation.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.The president’s comments came as OPEC+ warned that damage to Mideast energy assets will have a prolonged impact on oil supply even after the conflict ends. Yet it’s showing little sign of progressing toward a ceasefire as attacks have continued to flare around the region, keeping key oil prices hovering well above $100 a barrel. “The prediction game remains quite tricky for investors,” said Homin Lee, a strategist at Lombard Odier. “Investors’ focus will squarely be on military actions on both sides of the Persian Gulf and whether or not Hormuz vessel crossings can improve further despite these attacks.”The fallout from the war has rapidly darkened the economic outlook by threatening to cool growth and push up already elevated inflation, roiling bets on whether the Federal Reserve will resume cutting interest rates later this year. Attention remains firmly on energy prices and the closure of the Strait of Hormuz — a waterway crucial for the flow of oil from the Middle East.It’s going to be a key week for investors with the US inflation report due out on Friday. The roughly $1 per gallon increase in US gasoline pump prices probably drove the March consumer price index up 1%, the most since the post-pandemic inflation surge in 2022, according to an economist survey before the data is published. The S&P 500 is coming off its best weekly gain of the year, a 3.4% jump fueled by short covering and speculation early in the week that Trump was poised to begin wrapping up US military operations. The gains left the index just 5.7% below its January record. But on Thursday, the last trading day of the holiday-shortened week, US stocks initially opened lower after Trump’s televised evening address dashed optimism he would layout a solid timeline for concluding the war. Equities later recovered the losses on reports that Iran was talking with Oman about ways to handle shipping traffic through Hormuz. Even so, West Texas Intermediate crude ended above $110, rising 11% Thursday, while the global Brent benchmark settled near $109.On Friday, US Treasuries fell after a stronger-than-forecast reading on March employment prompted traders to pare bets on Fed interest-rate cuts. That marked a shift from much of last week, when bonds gained as the attention shifted from the inflation implications of the energy-price spike to speculation that rising costs to consumers and businesses will slow the pace of growth. Yields on two-year Treasuries climbed four basis points to 3.84%. The US added 178,000 jobs last month, higher than all estimates in a Bloomberg survey.The continued Middle-East hostilities have left oil prices only slightly below the $120 hit last month as key energy assets were attacked and the closure of Hormuz created what the International Energy Agency called the biggest supply disruption in the history of the market.Meanwhile, the Islamic Republic’s continued attacks damaged Kuwait’s oil headquarters and shut down an Emirati petrochemicals plant.The continued bombings — and the lack of any apparent progress toward negotiations that would end the conflict — have raised the specter that it could drag on even though Israel and the US insist their core objectives are being achieved.Trump has previously dialed back his escalation threats, including two weeks ago before markets reopened for the week. Trump also said he plans to hold a news conference at 1 p.m. New York time on Monday.“Trump is probably serious in his expressed desire to step away after two or three more weeks,” Lombard Odier’s Lee said. “But the obvious path-dependency inherent in the conflict suggests that his attempt to carry out a final round of aggressive strikes can backfire significantly for the markets.”—With assistance from Chris Nagi and Anand Krishnamoorthy.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.