US STOCKS-Wall St futures fall on fears of protracted Middle East conflict
By Johann M Cherian and Ragini Mathur
March 2 (Reuters) - U.S. stock index futures dropped over 1% on Monday as investors braced for a prolonged Middle East conflict that threatened to disrupt global trade routes and reignite inflationary pressures.
Sectors that were hit the most in premarket trading included airlines, as a number of carriers halted flights, while several oil and gas facilities in the Middle East stopped production, which pushed crude prices up 8%.
That painted an overall cloudy outlook for the global economy and also weighed on financial stocks.
Delta DAL.N and United Airlines UAL.O tumbled 6% each in premarket trading. Big banks such as Bank of America BAC.N and Citigroup C.N slid 2% each.
Investors instead flocked to traditional safe havens such as the dollar =USD. Higher precious metals prices helped miners such as Kinross Gold
Defense stocks also got a boost, with Lockheed Martin LMT.N and RTX RTX.N gaining over 6% each, while Kratos KTOS.O rose 6.3% and AeroVironment AVAV.O was up 11%.
After coordinated U.S. and Israeli strikes on Iran over the weekend killed Tehran's Supreme Leader, Israel launched retaliatory attacks following air strikes by Iran and Hezbollah militants in Lebanon, deepening fears that the conflict could widen further across the region.
U.S. President Donald Trump also said the conflict could stretch on for another four weeks, according to a report.
"With Trump saying the campaign could run for four weeks, there is plenty of scope for more downside should the conflict widen to encompass oil and gas infrastructure," said Chris Beauchamp, chief market analyst at online trading and investing platform IG.
At 07:22 a.m. ET, Dow E-minis YMcv1 were down 574 points, or 1.17%, and S&P 500 E-minis EScv1 were down 78.5 points, or 1.14%. Nasdaq 100 E-minis NQcv1 were down 365.5 points, or 1.46%.
Wall Street's fear gauge, the CBOE VIX index .VIX, jumped 3.54 points to a three-month high of 23.4.
The escalation comes at a precarious moment for markets already rattled by AI disruption concerns, private credit jitters and trade policy uncertainty - factors that drove the S&P 500 .SPX and the Nasdaq .IXIC to their steepest monthly declines since March 2025 on Friday.
A sustained spike in oil prices threatens to compound inflationary pressures just as data shows U.S. tariffs are already pushing prices higher.
Those concerns lifted Treasury yields from early declines, and investors raised their bets on the Federal Reserve staying put on interest rates in June.
Wells Fargo's chief equity strategist, Ohsung Kwon, said that the benchmark S&P 500 .SPX could fall to 6,000 points, or nearly 13% from the last close, if crude prices hit over $100 per barrel in a worst-case scenario. Earnings could also be hit by about 1.3% in an oil‑driven stagflation shock.
Oil companies Occidental Petroleum OXY.N and ConocoPhillips COP.N added about 6% each, while crude-price-sensitive cruise stocks Carnival CCL.N and Norwegian Cruise NCLH.N fell 7% each.
Separately, Norwegian Cruise forecast annual profit below Wall Street expectations.
A consortium led by BlackRock-owned BLK.N Global Infrastructure Partners and equity firm EQT AB EQTAB.ST agreed to acquire AES Corp AES.N for $33.4 billion, including debt. However, the utilities company's shares fell 17%.
On the data front, manufacturing PMIs for last month are due later in the day, and the focus will shift to a key non-farm payrolls report later in the week.
Inflation gauges 
