S&P 500 futures fell 39 points, or 0.5%, while Dow Jones futures were flat at 06:27 ET. The overnight weakness extends Monday’s session, which ranked as the S&P 500’s worst day of August so far, with the benchmark shedding 0.5%, the Dow off 0.5%, and the Nasdaq Composite dipping 0.3%.
Iran Tensions Drive Strait of Hormuz Risk Premium
The sell-off has few clean catalysts, but geopolitics is doing the heavy lifting. Renewed friction between Washington and Tehran has investors pricing in a more prolonged disruption to the Strait of Hormuz, the chokepoint for roughly a fifth of global seaborne oil.
“There wasn’t a single catalyst for the declines, but with few signs of the U.S. and Iran coming to any sort of a deal, that meant investors priced in a more extended closure of the Strait of Hormuz,” Deutsche Bank analysts wrote in a note.
Iran has signaled a more offensive posture in its conflict, citing deadlocked negotiations. President Donald Trump has separately warned of possible military action against Oman if it interferes with U.S. efforts to reach an agreement with Iran, widening the uncertainty perimeter around the shipping route.
Yields Climb as Oil Reignites Inflation Fears
Brent crude advanced on Monday and held above $90 per barrel on Tuesday. The move in oil prices pushed Treasury yields higher, with the 30-year yield closing at its highest level in nearly two decades. The bond market is repricing the risk that a sustained energy rally could reawaken inflation and force the Federal Reserve to reverse course on rate cuts.
Fed minutes from the July 28-29 meeting are due Wednesday. The central bank held its benchmark rate at 3.50%-3.75%, but the decision was split, with three policymakers dissenting in favor of a hike. That internal division makes the minutes a high-stakes read for markets already on edge about the inflation trajectory.
Chip Stocks Provide a Floor
The broader downturn was partially cushioned by strength in semiconductor names. Media reports on artificial intelligence startup Anthropic’s revenue and Nvidia’s smaller-than-expected financial commitment to an Ohio data center lifted chip stocks, offering a counter-narrative to the risk-off tone in the rest of the market.
Retail earnings add another layer to this week’s calendar. Home Depot posted second-quarter sales and profit that topped expectations, with shares up roughly 2% in premarket trading. Walmart, Target, and Lowe’s are also scheduled to report, giving investors a fresh read on consumer health after July retail sales and employment data came in below forecasts.
What Happens Next
Wednesday’s Fed minutes are the immediate inflection point. If the text emphasizes inflation concerns or signals openness to rate hikes, Treasury yields could extend their climb and pile further pressure on rate-sensitive growth stocks. Conversely, a dovish tone could cap the oil-driven yield move.
Watch Brent crude’s hold above $90 — a sustained break higher would tighten financial conditions and likely drag the Nasdaq deeper. Retail earnings from Walmart and Target will also test whether the consumer can absorb higher energy costs, a signal that matters as much for the inflation outlook as for the stocks themselves.
— Hiro Tanaka, markets desk, AXO News