Oil jumps, Fed hawkish, Jobs data - What’s moving markets

Investing.com - U.S. stock futures fell early Monday as renewed U.S.-Iran fighting pushed oil prices higher and added another layer of uncertainty for investors.

Markets were also digesting Federal Reserve Chair Kevin Warsh’s hawkish message at Jackson Hole, which has sharply increased bets on a September interest-rate hike ahead of a data-heavy week for the U.S. economy.

1. Futures fall as U.S.-Iran fighting resumes

U.S. stock futures slipped early Monday after the United States launched fresh strikes against Iran, marking the first known American attacks on the country since late July.

By 03:45 ET, S&P 500 futures and the Dow futures were down 0.15% each, while the Nasdaq 100 futures were broadly unchanged.

The renewed fighting came after weeks of escalating economic pressure from Washington, with the Trump administration increasingly relying on sanctions to pressure Tehran.

The return to military action raises concerns about a wider escalation, particularly because the strikes took place on Larak Island in the Strait of Hormuz, one of the world’s most important oil shipping routes.

2. Oil jumps as Hormuz tensions return

Oil prices climbed more than 2% on Monday after the U.S. strikes and an Iranian retaliatory attack on two U.S. bases in Jordan raised fears of renewed disruption to energy supplies.

Brent crude rose 2.5% to $90.31 a barrel, while U.S. West Texas Intermediate crude gained 2.2% to $85.23.

The latest U.S. strikes targeted two rocket launchers on Iran’s Larak Island, which sits in the Strait of Hormuz near the strategic port of Bandar Abbas.

Iran has previously threatened shipping through the waterway, through which a significant share of global oil supplies normally passes.

For investors, oil is one of the most important links between geopolitics and financial markets. Higher crude prices can increase fuel and transportation costs, pushing inflation higher and potentially making it harder for the Fed to hold rates steady.

3. September rate hike bets jump

Markets are now pricing in a much greater chance of the Federal Reserve raising interest rates at its September meeting after Warsh delivered a hawkish message at the Jackson Hole symposium on Friday.

Fed funds futures now imply about a 60% probability of a 25-basis-point rate hike on Sept. 16, up from around 35% before Warsh’s speech.

Warsh said the central bank still has significant work to do to bring inflation under control, strengthening expectations that policymakers may be willing to keep rates higher - or even raise them - if price pressures remain persistent.

For retail investors, higher rates generally make borrowing more expensive and can reduce the appeal of stocks, particularly highly valued technology and growth companies. They can also support bond yields, giving investors more attractive alternatives to equities.

The key question now is whether upcoming economic data will reinforce Warsh’s hawkish stance.

4. Jobs and manufacturing data take center stage

Investors face a data-heavy week that could determine whether the September rate-hike debate intensifies further.

The July JOLTS report is due Tuesday, followed by August ADP private payrolls on Wednesday and the August ISM manufacturing data. The closely watched nonfarm payrolls report is due Friday and is expected to show some recovery in hiring.

The reports will give investors a clearer picture of whether the U.S. labor market remains strong enough to withstand higher interest rates and whether inflationary pressures are likely to persist.

Fed officials Michael Barr and Christopher Waller are also scheduled to speak during the week, offering investors a chance to assess whether Warsh’s hawkish message has broader support within the Federal Open Market Committee.

For investors, the jobs data is particularly important. A strong labor market could give the Fed more room to raise rates, while signs of weakness could make policymakers more cautious.

5. Sanctions add another pressure point for Iran

Washington is also stepping up its financial pressure on Tehran, with Treasury Secretary Scott Bessent warning that the United States could announce new secondary sanctions every week.

Bessent said the initial focus would be on banks and warned that institutions helping Iran could ultimately be cut off from the dollar-based financial system.

The comments came after the United States imposed sanctions on UAE branches of Egypt’s Banque Misr over alleged financial links to Iran.

The latest measures highlight the Trump administration’s broader strategy of combining military pressure with economic sanctions in an effort to force Tehran back to negotiations.

For markets, however, tougher sanctions could further restrict Iranian oil exports and tighten global energy supplies. That could keep crude prices elevated even if the latest military escalation does not develop into a broader conflict.

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