Geopolitical Tensions Drive Market Volatility
US equity futures swung between gains and losses early Monday as investors navigated another turbulent session. The conflict in Iran has now ground into its fourth week with no signs of de-escalation, creating a vacuum in market sentiment.
Futures on the S&P 500 Index remained little changed after earlier losses, though contracts indicated Asian equity markets were poised to fall, tracking declines seen in US stocks on Friday. In bond markets, Australia's 10-year government bond extended its losses, with yields on the benchmark note rising 13 basis points on Monday.
The dollar edged higher against most major peers, while risk-sensitive currencies like the Australian dollar and Mexican peso lagged significantly.
The Hormuz Standoff Escalates
President Donald Trump issued a 48-hour ultimatum to Tehran late Saturday, demanding the reopening of the Strait of Hormuz or facing strikes on Iranian power plants. This deadline expires Monday evening in New York time.
Iran responded swiftly, stating that any such attack would prompt it to shut the waterway indefinitely and target US and Israeli energy infrastructure across the region. This exchange signals a high risk of further escalation between both sides.
"Pulling back on this war is not Trump's sole decision," Matt Maley, the chief market strategist at Miller Tabak, said in an interview. "Uncertainty has been increasing for three weeks and the uncertainty took a big jump now. Even if people don't sell, they are not going to be buying — and if there's no bids, it creates a vacuum."
Inflation Fears and Bond Selloffs
Global markets have been ravaged by the US-Iran war, which saw stocks and bonds sell off in tandem last week. US yields are perched at their highest in months following a third straight week of bond losses. Short-term notes led the rout, with two-year Treasury yields climbing 18 basis points to 3.90%, mirroring selloffs in European bond markets as investors positioned for higher rates.
The selloff in the US accelerated on Friday as traders anticipated that the Federal Reserve may shift to hiking interest rates this year, driven by oil prices threatening a fresh inflation shock. Markets are bracing for similar moves from central banks in Japan, Europe, and the UK, even as the war dampens the global economic growth outlook.
After markets closed on Friday, Trump indicated he was looking for a way to pull back from the war via social media, claiming the US was "very close" to meeting its objectives. However, his subsequent threats to bomb power plants—and Iran's vow to retaliate—showed little progress toward a ceasefire.
"The dramatic escalation in rhetoric appears likely to see a further risk-off move when markets open, as the prospect of long-term disruption to global energy supplies becomes harder to downplay," ANZ Group Holdings strategists including David Croy wrote in a note to clients.
Market Data and Commodities
The twin risks of rising inflation and potentially weaker growth drove the S&P 500 down by 1.5% on Friday, capping its fourth-straight weekly loss—the longest losing streak in a year. The benchmark 10-year Treasury yield surged by 13 basis points to 4.38%, reaching its highest level since late July.
The standoff over Hormuz, through which roughly a fifth of the world's oil and liquefied natural gas normally flows, has deepened a supply crisis already rippling into gasoline prices, fertilizer costs, and food production. Traffic through the strait has effectively ground to a halt since the conflict began at the end of February.
In other commodities, gold rose after recording its biggest weekly decline in more than 40 years, while silver jumped over 2% in early Monday trading. Brent crude fell over 1% to trade just around $110 per barrel, and West Texas Intermediate crude fell 1% to $97.23 a barrel.
Key Market Metrics (Early Monday):
- S&P 500 Futures: Fell 0.1% as of 7:34 a.m. Tokyo time.
- Bloomberg Dollar Spot Index: Little changed.
- Japanese Yen: Unchanged at 159.25 per dollar.
- Offshore Yuan: Unchanged at 6.9067 per dollar.
- Australia's 10-Year Yield: Advanced 13 basis points to 5.15%.
Original source
US Stock Futures Pare Drop as Crude Turns Lower: Markets Wrap
Published: Mar 22, 2026
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