(Reuters) -U.S. stock index futures dropped on Friday after Israel’s military strike on Iran escalated tensions in the oil-rich Middle East and battered risk sentiment across global markets.
Israel’s widescale strikes against Iran’s nuclear facilities were aimed at preventing Tehran from building an atomic weapon. Iran has promised a harsh response and retaliated by launching 100 drones.
The escalation of tensions in the Middle East – a major oil-producing region – sent oil prices surging more than 6% and U.S. energy stocks rose in tandem, with Chevron and Exxon advancing nearly 3% in premarket trading.
The strikes come just days ahead of a planned sixth round of nuclear talks between Iran and the United States. Tensions had been building as U.S. President Donald Trump’s efforts to reach a nuclear deal with Iran appeared to be deadlocked.
U.S. Secretary of State Marco Rubio called the Israeli offensive a “unilateral action” and said Washington was not involved.
At 04:32 a.m. ET, Dow E-minis were down 505 points, or 1.17%, S&P 500 E-minis were down 70.5 points, or 1.17%, and Nasdaq 100 E-minis were down 309.25 points, or 1.41%.
A 1.6% slump in Russell futures pointed to sharp declines for domestically focused stocks.
Airline stocks dipped as the surge in crude prices raised concerns about higher fuel costs. Delta Air Lines was down 3.9%, United Airlines dropped 4.8%, Southwest Airlines lost 2.5% and American Airlines declined 3.9%.
Defense stocks rose, with Lockheed Martin up 4.7%, RTX Corporation up 5.5%, Northrop Grumman up 4.2% and L3harris Technologies up 4.3%.
The S&P 500 still remains just 1.8% below its record high reached earlier this year, following stellar monthly gains in May driven by upbeat corporate earnings and a softening in Trump’s trade stance.
The tech-heavy Nasdaq is about 2.8% off its record closing high reached in December last year.
Investors are now focused on the Federal Reserve’s meeting scheduled next week where policymakers are expected to keep interest rates unchanged.
(Reporting by Kanchana Chakravarty in Bengaluru; Editin by Devika Syamnath)
Comments