US Equity Futures Down 0.6% While Oil Advances 3% as Houthis Join War, More US Troops Arrive in Middle East

US equity futures are down around 0.6% in early trading. WTI crude oil futures gained 2.87% while Brent futures extend to 2.4% higher.

Oil advanced as Iran-backed Houthi militants in Yemen entered the Middle East war and more US troops arrived in the region, raising fears of escalation and threatening further tumult for energy markets.

While the Houthis didn’t say they would target vessels transiting through the southern Red Sea and the Bab El-Mandeb Strait, they have the capability to do so. The Saudi Arabian port of Yanbu — which the kingdom is using to bypass Hormuz for its oil exports — is also well within the range of Houthi missiles.

Brent has surged more than 50% in March as the war between the US, Israel and Iran has upended global markets. The conflict has entered its fifth week and is showing no sign of abating despite a diplomatic push by Washington last week and separate peace talks over the weekend in Pakistan.

Iran has choked off all but a fraction of the traffic passing through the Strait of Hormuz, the waterway that links the Persian Gulf to global markets. Tehran has moved to formalize its control of artery, barring most vessels, while allowing a handful to pass, including from Pakistan, Thailand and Malaysia.

The Washington Post reported the Pentagon is preparing for weeks of ground operations in Iran, citing US officials, but senior Trump administration staff, including Secretary of State Marco Rubio, have downplayed such a move. Still, the arrival of about 3,500 sailors and Marines has the market on edge about escalation.

The involvement of the Houthis presents a new risk for crude markets. The group effectively shut the Red Sea to most Western shippers after the war in Gaza began in 2023, forcing vessels to reroute. Any threats to cargoes loaded via Saudi Arabia’s Yanbu would further constrain supplies. Riyadh has been ramping up exports through Red Sea, cushioning the supply shock.

Banks have been scrambling to calculate how the war — and prices — may evolve. Macquarie Group Ltd. said last week futures may hit $200 a barrel if the conflict drags on till June and Hormuz stays shut in a scenario with 40% odds.

Brent’s prompt spread points to acute concern about near-term supply in a backwardated, bullish pattern, with the front-month contract trading at a huge premium to the next. The gap was at $7.58 a barrel on Monday, compared with little difference the week before the war broke out.

The conflict has hit other industries. Over the weekend, Emirates Global Aluminium sustained “significant damage” during an Iranian missile and drone strike on Saturday. In addition, an Aluminium Bahrain facility was hit.