US stock futures suffered sharp losses on Monday, with Dow futures dropping over 370 points, as a surge in oil prices and climbing Treasury yields reignited fears of persistent inflation and tighter Federal Reserve policy. The S&P 500 and Nasdaq-100 futures also slipped 0.4% and 0.3%, respectively, setting a cautious tone for the week ahead.
The 10-year Treasury yield advanced to 4.61%, amplifying borrowing cost concerns and putting pressure on growth stocks. Meanwhile, Brent crude futures surged above $110 per barrel after US-Iran peace talks stalled, and President Trump issued a stark warning on Truth Social, saying Iran “better get moving, FAST, or there won’t be anything left of them.” The escalation disrupted shipping through the Strait of Hormuz, adding a geopolitical risk premium to energy prices.
CME’s FedWatch tool showed traders now price a 54% probability that the Fed will raise rates at least once before the end of 2026, a dramatic shift from less than 1% just a week earlier. The minutes from the Fed’s latest meeting, due on Wednesday, are expected to offer further clues on whether policymakers are leaning away from easing. “The stock market is coming to the sudden realization that new Fed Chair Kevin Warsh may need to raise rates rather than lower them, and the market hates that,” said Richard Reyle, chief investment officer at Questar Capital Partners.
This week’s earnings from Nvidia and Walmart are seen as critical tests. Nvidia’s results will gauge the health of artificial intelligence spending, while Walmart’s report will reflect consumer resilience amid elevated prices. In pre-market action, Dominion Energy rallied on talk of a NextEra Energy takeover, while UnitedHealth Group fell after Berkshire Hathaway disclosed it had trimmed its stake. The broader question remains whether equity markets can withstand the dual pressure of higher yields and elevated oil prices without a deeper correction.
