Dow Jones Industrial Average futures declined early Tuesday, marking the beginning of a truncated trading week. Market participants are closely monitoring the ongoing U.S.-Iran conflict alongside escalating trade tensions between Canada and the U.S. The 30-stock average declined by 491 points, representing a decrease of 0.9%, as of 5 am. S&P 500 futures were down by 0.4% ahead of Tuesday’s regular session, while Nasdaq-100 futures fell 0.2%. U.S. markets experienced a closure on Monday in observance of the Labour Day holiday. Stock futures declined as oil prices reached six-week highs, marking a third consecutive day of increases, amid exchanges of strikes between Iran and the U.S. over the weekend. Brent crude oil futures experienced an increase of 2.3%, reaching a price of $99.22 per barrel. West Texas Intermediate futures increased by 3.3%, reaching a price of $94.54.
Crude prices have surged in the past month as the U.S.-Iran conflict persists, exerting upward pressure on Treasury yields as traders become increasingly concerned that sustained energy prices will exacerbate inflationary pressures. The benchmark 10-year Treasury note yield last week reached its peak level since November 2023, while the shorter-term 2-year note yield ascended to a high not seen since January 2025. “Brent crude is at a six-week high, with apparent moves toward a deal between Iran and Oman to manage the flow of some shipping through the Strait of Hormuz merely underlining Tehran’s control of the waterway,” Dan Coatsworth said in a note on Tuesday morning. “Investors will have a laser focus on US inflation data out later this week to see if the impact of rising energy prices is starting to feed into broader inflationary pressures.”
“A run of central bank meetings over the coming weeks will test whether equity composure holds,” said Ed Yardeni. “Bond yields are also rising worldwide. The question is whether that reflects better-than-expected economic growth, higher-than-expected inflation, and/or looming fiscal debt crises.” The Federal Reserve is scheduled to convene for a monetary policy meeting next week. Traders are assigning a 60% probability to the central bank implementing a quarter-percentage point rate increase following the meeting, as indicated by the CME Group’s FedWatch tool. Those odds may shift this week as wholesale and consumer inflation data are set to be released on Thursday and Friday, respectively. Another increase in oil prices could also affect them as tensions in the Middle East persist. Traders are once again faced with the prospect of escalating trade tensions between the U.S. and Canada. On Tuesday, Canada will implement retaliatory tariffs on approximately $20 billion worth of U.S. goods.
President Donald Trump on Monday stated that Canadian aircraft manufacturer Bombardier will not be permitted to sell in the U.S. unless Canada commences production of its products within the United States. “NO MORE SELLING BOMBARDIER IN THE UNITED STATES!” Trump wrote on Truth Social. In Asia, markets concluded the trading session with losses. South Korea’s Kospi experienced a decline of 0.58%. Japan’s Nikkei 225 experienced a decline of 1.7%. Mainland China’s CSI 300 closed 0.36% lower, while Hong Kong’s Hang Seng Index was down 0.38%. Australia’s S&P/ASX 200 experienced a decline of 1%. European equities also retreated on Tuesday, with the pan-European Stoxx 600 trading 0.4% lower early in the regional session.
