Stock Futures Drop To Close Out August As Oil Jumps On Renewed Iran Hostilities
US stock futures dropped in thin trading with most traders out as summer draws to a close, while oil prices jumped after the US and Iran exchanged attacks for first time in weeks. Brent futures rallied almost 4% topping $90-handle and WTI contracts rise above $86 a barrel. As of 8:00am ET, S&P futures dropped about 0.2% and contracts on the Nasdaq 100 dipped 0.1% as most Mag 7 stocks drop while energy stocks rise (CVX +2%, XOM +2%) with as tensions resume in the Middle East. Europe’s benchmark Stoxx 600 equity index edged 0.2% lower, with UK markets closed for a holiday. Asian equities fall across the region. Nikkei sheds almost 1% while the Kospi closed flat, reversing an earlier loss. Hang Seng drifts 0.7% lower and ChiNext is down 1.3%. The dollar weakens against most FX majors. The yen strengthens back below 160/USD following Treasury Secretary Bessent’s BOJ remarks. Offshore yuan is 0.1% firmer after a small manufacturing PMI beat. Treasury 10-year yields are flat at 4.72% after Friday's post J-Hole blowout as the curve bull steepens despite higher energy prices. In commodities, the overnight Middle East attacks are driving oil prices higher with WTI above $85/bbl and Brent above $90/bbl. Elsewhere base metals are outperforming precious even as gold recovered from a $50 drop to trade unchanged around $4,460 an ounce. This week’s macro data include ISM / NFP with NFP one of 2 key prints (CPI) for the Fed to determine a Sept hike. Stronger ISM may boost the broadening portion of the rally. AVGO earnings may boost the Tech / AI theme.
In premarket trading, Mag 7 stocks are mostly lower with the exception of NVDA which rises 0.6% after Friday's slide (Apple -0.3%, Meta -0.1%, Amazon -0.4%, Alphabet -0.5%, Tesla -0.6%, Microsoft -0.6%) BioMarin Pharmaceutical (BMRN) rises 4% after the company said it had entered into binding terms with Ascendis Pharma, resolving the patent and ancillary disputes concerning Ascendis’s Yuviwel. Energy stocks (CVX +2%, XOM +2%) rise with oil as tensions spiked in the Middle East, with the US and Iran exchanging strikes for the first time in about a month and Tehran claiming a tanker was hit by mines in the Strait of Hormuz. Kaiser Aluminum (KALU) rises 2% after UBS analyst Alex Stansbury raised the recommendation on to buy from neutral. PG&E (PCG) falls 15% and Edison International (EIX) declines 5.5% as California legislators introduced a bill that would update the state’s wildfire response without shifting liability away from publicly traded utilities. Pinterest (PINS) slips 3% after announcing Chief Financial Officer Julia Brau Donnelly will step down from her role on Oct. 30 after three years with the company. Science Applications (SAIC) rises 8% after the government IT services contractor boosted its revenue guidance for the full year. SLB (SLB) inches 1% higher after agreeing to acquire Kelvion, a firm that provides data center cooling solutions, from investors including Apollo Funds for $3.4 billion in cash. In other corporate news Amgen’s Repatha (evolocumab) reduced the risk of death by 20% in high-risk adults without prior heart attack or stroke, versus placebo, in a pre-specified Phase 3 trial. SpaceX and NASA are delaying the launch of a planned mission to the International Space Station to fix an oxidizer leak in the Dragon spacecraft’s propulsion system. Shein Global Holdings Ltd. priced its IPO in Hong Kong. The fast-fashion retailer raised $1.7 billion, giving it a market value of $26 billion that’s a far cry from the $100 billion it once commanded. The shares fell as much as 17% in gray market trading.
US markets are set to open lower in the last trading session of a low-volume August as oil prices jumped on the back of renewed hostilities in the Middle East. A renewed rise in oil prices complicates the outlook for interest rates as investors digest Federal Reserve Chairman Kevin Warsh’s hawkish inflation comments at Jackson Hole. Traders boosted bets on a September rate hike after he spoke, although some market commentators expressed skepticism about such a move. That said, traders already have an eye on the month ahead, with cross-current signals from other assets including bonds, the energy complex and currencies, while conversations on AI capex are never far from earshot.
A lot of weekend commentary was devoted to digesting the Warsh speech at Jackson Hole, with some commentators of the view that it wasn’t as epochal as the volume of attention suggests. Yes, the tone was hawkish, but some bond investors are voicing skepticism about Fed hikes. Warsh said financial conditions aren’t currently restrictive and described rates as the Fed’s “predominant tool” for achieving its mandate, while stopping short of signaling support for a hike in September. Even so, bond investors at ABN Amro Investment Solutions and Brandywine Global Investment Management are skeptical that higher rates will happen
The Federal Reserve Reform Act of 1977 lists three objectives: maximum employment, stable prices, and moderate long-term interest rates. The third receives remarkably little attention, with the first two hogging the limelight, notes Gary Paulin of Northern Trust Asset Management. “Could that objective become more important if the other two prove difficult to manage simultaneously?” Paulin thinks it could.
Meanwhile, real-world inflation remains in view: Brazil, the world’s biggest exporter of soybeans, cotton, coffee, sugar and orange juice, is about to kick off planting season facing a global diesel crunch colliding with a seasonal spike in demand for the fuel. Goldman Sachs stepped up warnings of tightness in global refining driven by wars in the Middle East and between Moscow and Kyiv, with the bank more than doubling its forecasts for profits from making diesel.
Additionally, the US-China AI funding divide remains a perplexing question for investors. While hyperscalers have gone from accounting for 2% of US nonfinancial investment-grade bond issuance in 2025 to 19% this year, China’s AI race is creating no such pressure on yields as its tech firms rely predominately on bank loans and equity financing rather than the bond market. But a resource-hungry AI revolution will require broader funding avenues over the long run. Speaking of AI, SK Hynix is studying the feasibility of a joint venture to make memory chips in Japan to meet surging AI demand while controlling production costs. And Amazon is expected to be the next hyperscaler to tap Australia’s debt market for billions of dollars in capital, according to the Financial Review.
The VanEck Semiconductor ETF (SMH) has increasingly become an expression of semiconductor/AI FOMO, with investors chasing upside through long calls, creating a “vol up/spot up” dynamic at times this year before the recent reversal. And the semiconductor cohort that drove the early summer tech melt-up is giving way to other pockets in tech, as explored in today’s Taking Stock column.
In geopolitics, this week’s G20 meeting in North Carolina is in focus. The US Treasury has excluded journalists from several media outlets, including Bloomberg News, from the gathering. Bessent is said to be pushing the G20 to rethink China trade terms, Reuters reported.
European stocks trade sideways at the start of the week with the Stoxx 600 down 0.1% as oil prices and bond yields rose amid simmering tensions between the US and Iran, and on low volumes, with London closed for a bank holiday. Here are the biggest movers Monday:
Engcon gains as much as 9.5%, the most since July, after Swedish business daily Dagens Industri named the construction equipment firm its stock of the week, recommending readers buy shares in the company InPost trades little changed after its stronger than expected 2Q profitability was overshadowed by a weaker outlook for the remainder of the year, with new EU customs rules on small parcels set to weigh on volumes in Poland Bakkafrost shares fall as much as 7.6%, the most since July, after the salmon farmer reported its latest earnings. SB1 Markets says another weak quarter in Scotland weighs on the result due to “significant” biological issues Asian stocks recovered from earlier declines as South Korean shares swung to a gain, while regional financial companies also advanced. The MSCI Asia Pacific Index was little changed after earlier dropping more than 1%. Korea’s Kospi closed up 0.5%, led by gains in Samsung Electronics and SK Hynix, while China’s CSI 300 Index rose 0.3%. Regional stocks had fallen at the start of trade after Fed chair Kevin Warsh sounded hawkish in his comments at Jackson Hole on Friday. MSCI’s regional equity gauge has risen 3.1% in August, snapping two months of declines. A gauge of Asia’s bank shares led gains on expectations of higher yields. Energy and utilities stocks also rose on higher oil prices stemming from the US attack on Iranian rocket launchers that were preparing to send mines into the Strait of Hormuz. A gauge of Asia’s bank shares led gains on expectations of higher yields. Energy and utilities stocks also rose on higher oil prices stemming from the US attack on Iranian rocket launchers that were preparing to send mines into the Strait of Hormuz. Warsh had warned inflation isn’t meaningfully slowing and added policymakers must be confident that it is clearly moving to their objective. Otherwise, they “have work to do.”
Warsh’s remarks “were the clearest signal yet that the Fed sees inflation, not growth, as the bigger risk right now,” said Billy Leung, an investment strategist at Global X Management. “Markets have quickly repriced September hike odds.” “On the positive story, under the surface is that AI monetization is broadening out,” Leung said. “We saw enterprise software and cybersecurity names post some of their strongest moves of the year on earnings, which tells you the AI trade is no longer just about chips and hyperscalers.”
In FX, the dollar weakens against most FX majors. The yen strengthens back below 160/USD following Treasury Secretary Bessent’s BOJ remarks. Offshore yuan is 0.1% firmer after a small manufacturing PMI beat.
In rates, treasury 10-year yield eases a basis point to 4.71%. Australian yields are little changed. JGB futures inch slightly lower.
In rates, treasuries mixed with the yield curve steeper in thin trading conditions with UK market closed for a bank holiday. Front-end tenors outperform as investors continue to digest Federal Reserve Chairman Kevin Warsh’s hawkish comments on inflation last week in Jackson Hole, which spurred the biggest increase in 2-year yields since June 17 as additional tightening was priced in. Front-end yields are 1bp-2bp richer on the day, long-end tenors cheaper by about 1bp, steepening 2s10s by about 2.5bp, 5s30s by about 2bp, unwinding a small portion of Friday’s dramatic flattening move; 10-year yields are little changed around 4.72% Long-end tenors may benefit over Monday’s session from anticipation of buying related to the month-index index rebalancing at 4pm, which will increase its duration by an estimated 0.10 year. Regarding Fed policy expectations, around 16bp of tightening remains priced in for the Sept. 16 decision; Barr, Waller and Hammack are scheduled to speak this week before the Sept. 5 start of the external communications blackout around that meeting. IG dollar issuance slate empty so far, and Treasury coupon issuance is on hiatus until next week’s 3- and 10-year note and 30-year bond auctions.
In commodities, oil benchmarks are up more than 3%, after tensions rose in the Middle East, with the US and Iran exchanging strikes for the first time in about a month while Tehran claimed a tanker was hit by mines in the Strait of Hormuz. Brent futures rally almost 4% topping $90-handle and WTI contracts rise above $86 a barrel. Gold falls more than $40 to near $4,410 an ounce.
US economic data calendar includes August Dallas Fed manufacturing activity at 10:30am; ahead this week are ISM manufacturing and services gauges, JOLTS job openings, ADP employment change and, on Friday, the August jobs report
Market Snapshot
Top Overnight News
Iran and the United States traded attacks for the first time in over a month overnight into Monday. Iran fired missiles toward US military targets in Jordan and the United Arab Emirates in retaliation for a strike on Iranian rocket launchers that the US said were trying to launch sea mines into the Strait of Hormuz. The exchange of strikes came just days after President Donald Trump declared the Strait of Hormuz free from mines and is a break with Washington’s recent shift in focus to maximizing economic pressure on Iran rather than military actions. CNN Iranian leaders are acknowledging the economic toll of war with the U.S., with the supreme leader urging the government to address the hardship and the president saying foreign trade has shrunk by a third due to the American sanctions and blockade. Yet Tehran signaled no retreat on Saturday, vowing to withstand U.S. pressure, pursue diplomacy and maintain what it said was control over the Strait of Hormuz. Reuters President Donal Trump said Friday night the United States has reached an oil agreement with Venezuela, a move he said will “more than double” American oil reserves, increase oil supply and lower gas prices. The deal is said to “secure majority control” of more than 65B barrels worth of oil reserves in Venezuela, or ~20% of the country’s total. CNN / FT U.S. Treasury Secretary Scott Bessent said on Sunday he will encourage G20 members to re-examine terms of trade with China to shrink global imbalances and press Beijing to rebalance its economy away from exports and toward domestic consumption. Bessent said in an interview ahead of a G20 finance leaders meeting that the current flood of exports from China was unsustainable, even though the U.S. direct trade position with China was "rapidly improving." Reuters China’s official manufacturing PMI remained in contraction in August, suggesting that momentum has yet to rebound after July’s sharp downturn. BBG China will start checking the security of its military supply chains, joining other nations in ramping up self-reliance of their defense industries. Iranian authorities seized an unidentified bulk carrier for polluting waters in the Persian Gulf near Bandar Abbas, state-run Islamic Republic News Agency reports. SK Hynix is exploring a joint venture to make memory chips in Japan to meet surging AI demand, Chairman Chey Tae-won said. BBG South Korea’s industrial production for Jul came in ahead of expectations at +0.2% M/M (vs. the Street -0.5%). BBG Russia’s Defense Ministry said it is planning “massive strikes” on Ukraine’s energy infrastructure, days after launching a devastating attack on a warehouse near Kyiv, amplifying fears of another winter assault. CNBC September is historically the worst month for Wall St, and traders are preparing for volatility during the coming weeks, with the FOMC meeting on 9/16 potentially a major catalyst. Barron’s A bipartisan US bill would permanently ban Chinese internet-connected vehicles, and target Chinese software and hardware in US autos: NYT Geopolitical Update
US attacked two missile launchers of the IRGC on Larak Island on Sunday, which were said to be on standby to launch missiles with sea mines toward the Strait of Hormuz, while there were later reports of explosions heard near Larak Island. US Central Command said IRGC claims of US aggression in the Strait of Hormuz are false, but added the US conducted limited precise action against IRGC minelaying forces that posed an imminent threat in the Strait of Hormuz. Iran’s Revolutionary Guards warned the US strike on Larak Island would be met with a response and punishment, while it said several soldiers and civilians were killed and wounded in the assault. Iran's Revolutionary Guards later announced that they retaliated with missiles and drones against two US bases in Jordan and warned that any attack against them will be met with a more devastating response, although a US official cited by Fox News stated no major damage in Iranian attacks on US forces in Jordan and that all missiles were intercepted. Iran's Press TV noted reports of Iran firing missiles towards US vessels in the Strait of Hormuz, and there were reports of explosions heard in the UAE and in Qatar, while Iran's army later said it launched tens of drones at the Al Minhad air base in the UAE. IRGC said a supertanker caught fire and was halted after being struck by two naval mines in the Strait of Hormuz, while it added that the tanker was attempting to pass illegally through the Strait of Hormuz and that ships must comply with its rules for passage. IRGC separately announced that it shot down a US MQ-9 drone over the Strait of Hormuz. Iran's Foreign Ministry said it will respond decisively to any further enemy military aggression, and stated that the US and parties supporting its military actions bear full responsibility for consequences of escalation. US President Trump reiterated in a pre-recorded Fox News interview that Iran cannot have a nuclear weapon and said the Iran blockade has been unbelievable, while he also commented that the US had to intervene in the Middle East to prevent Iran from using a nuclear weapon against Israel and other countries in the region and possibly against the US. US President Trump posted a generated video with the caption "Kharg Island being blown to smithereens!!!" US Treasury Secretary Bessent said the US Treasury plans to impose more Iran secondary sanctions every week, starting with banks. He also stated that they are telling banks it's not okay to have Iranian money and to aid the Iranian regime, and they will probably just sanction a bank outright next time, after the US imposed curbs on an Egyptian bank's United Arab Emirates branches. Iranian President Pezeshkian said they are not looking for war, but will give a decisive response to the aggressors, while he added that instability and unrest in the region are not in the interest of any countries and will create challenges for everyone. Iran's President said on Friday that Iran is ready for cooperation and understanding with regional countries, including Saudi Arabia and the UAE, while it is to open its route if four commitments are met. He also stated that Iran is to increase gasoline prices, and that exports and imports have decreased by up to 35% because of US sanctions and the blockade. US officials said they are monitoring the Strait of Hormuz and will strike any forces that threaten navigation in the waterway, Al Arabiya reported. Iran's IRGC Navy said compliance with regulations issued for the Strait of Hormuz is mandatory and warned against being “misled” by the US, Press TV reported. Yemeni armed forces reportedly targeted Saudi ships in the Red Sea, ISNA reported citing Yemeni media reports. UAE Ministry of Defense denied reports that Al Minhad Air Base was targeted by missiles, calling the claims unfounded and saying it remains on high alert and fully prepared to respond to any threats. Iranian oil operations are continuing on Kharg Island, and the oil sector there has not stopped, Al Hadath reported. A more detailed look at global markets courtesy of Newsquawk
APAC stocks were mostly lower heading into month-end and after recent hawkish comments from Fed Chair Warsh at Jackson Hole, while tensions in the Middle East escalated over the weekend after the US and Iran resumed strikes for the first time in over a month. ASX 200 saw mixed price action and was initially kept afloat amid strength in the top-weighted financials sector and with gains also seen in energy, utility and consumer industries, although upside was limited and eventually reversed following disappointing Private Sector Credit and Company Profits data. Nikkei 225 gapped lower at the open to below the 66,000 level, although it was off today's worst levels as participants also reflected on stronger-than-expected Japanese Industrial Production and Retail Sales data. KOSPI retreated amid weakness in its tech heavyweights and with a report noting that day traders are abandoning Korean chip leveraged ETFs in large numbers, with leveraged ETFs targeting twice the daily returns of chipmakers Samsung Electronics and SK Hynix, on course for their first monthly outflow. Hang Seng and Shanghai Comp were subdued, with risk appetite not helped by the latest official PMI data, in which headline Manufacturing topped forecasts, but Non-Manufacturing disappointed and both remained in contraction territory.
Top Asian News
Japanese government is to request JPY 143tln for the budget (general account) in FY27, Nikkei reported citing sources. South Korean President Lee nominated Lee Hyoung-il as the new finance minister and Kang Shin-chul as defence minister. China’s MOFCOM targets around CNY 60tln in total retail sales of consumer goods by 2030. New Zealand government cancelled fuel tax hike planned for next year. European bourses are mixed to start the week, with Italy's FTSE MIB outperforming while Germany's DAX 40 lags. To note, UK markets are closed today for a Summer Bank Holiday. Little in terms of newsflow; however, the US and Iran exchanged strikes for the first time in around a month at the weekend, with the US targeting Larak Island while Iran struck two US bases in Jordan. Overnight, South Korea's KOSPI gapped lower and traded with losses as much as 3.6%, before reversing and closing with gains of 0.5%. Samsung Securities' Roy Lim explains this reversal by pointing to notable buying by pension funds, primarily in tech names. Lim said pensions bought KRW 120bln worth of shares over a 20-minute period heading into the close. Sectors are mixed. Chemicals top the sector pile, with Autos and Energy completing the sector outperformers. Tech is the laggard, with worries that the Fed hiking rates will drag yields higher and, in turn, weigh on tech. Real Estate and Industrials round out the sector laggards.
Top European News
German North Rhine Westphalia CPI (Aug MM) 0.2% (Prev. 0.9%). German North Rhine Westphalia CPI (Aug YY) 2.9% (Prev. 2.7%). FX
Some USD weakness emerged this morning with DXY falling to a base around 99.50 which is the 50% Fibonacci retracement of the 99.19-99.72 rally seen after Warsh’s speech. Sell side commentary viewed the speech as hawkish, but Morgan Stanley said it was “not convinced it means hikes are coming” while GS said nothing is yet baked in and with focus on incoming data. Some also note algos reacted to Warsh’s use of “hike” within the context of “hikes on the trails”, in his use of a Kohn/Bernanke analogy. Note, month end may be playing a part in some of the moves seen this morning, where Barclays sees moderate USD selling. Action elsewhere paints the picture of the weaker USD, with all majors firmer vs. the Buck. JPY leads with earlier, modest losses accelerated around 160.00 where it fell to a 159.74 base. Data overnight showed better-than-expected Japanese Industrial Production and Retail Sales data, though nothing which moved JPY at the time. EUR keeps focus on French politics where PM Lecornu’s preview of the 2027 budget ruled out tax increases and de-indexing small pensions. In terms of the 2027 presidential election, an Elabe poll showed Le Pen victorious in every run-off tested, while Philippe (centre) currently appears best placed to challenge, polling at around 47.5%. On the left is Mélenchon, whose odds have ticked lower in recent days, perhaps a welcome development to EUR and EGBs. For now, EUR within a thin 1.1578-1.1606 with UK participants away on Bank holiday. To remind, Barclays sees moderate EUR buying vs USD. Fixed Income
A contained start to the week for fixed income. The European morning has been particularly quiet, owing to the fact that the UK is away on Bank Holiday. USTs are currently firmer by a few ticks, in 108-01 to 108-09 parameters; note, the initial low went below last week’s trough by half a tick, and any resumption of the move looks to 107-31+ from the last week of July. Overnight, USTs, JGBs and Bunds were all in relatively narrow ranges and ultimately didn't significantly differ from the unchanged mark. Broadly speaking, the main focus was the weekend’s geopolitical updates and particularly US action on Larak Island and then Iranian retaliation. Geopolitics aside, desks remain focused on the speech by Fed Chair Warsh last week, which had a hawkish skew and has contributed to the implied probability of a September 25bps hike increasing to just under 60% currently via CME, vs around 41% one week ago. Bunds reside in the red by a few ticks. Nonetheless, the benchmark holds at the upper-end of 123.43-60 parameters. No move to the German State CPIs, which saw the Y/Y tick up modestly from the prior, in-fitting with consensus for the 13:00BST mainland figure. On Tuesday, we get the Flash EZ HICP series, and given what we have seen so far the energy component may be the most pertinent. Commodities
Over the weekend, tensions between the US and Iran escalated after US forces struck IRGC missile and minelaying capabilities on Larak Island, prompting Iran to retaliate with missile and drone attacks against US and regional military targets. Further, Iran reported striking a tanker with mines, downing a US drone and targeting US vessels, while both sides exchanged warnings of further retaliation. President Trump reiterated that Iran cannot obtain nuclear weapons, while Washington is also intensifying economic pressure through additional sanctions. Despite the escalation, Iranian leaders said they do not seek war and remain open to regional cooperation, whilst also warning of a decisive response to further attacks. WTI Oct and Brent Nov futures gapped higher at the open after the US and Iran resumed strikes for the first time in over a month. The contracts are firmer by over 3%, with USD 84.11-86.53/bbl and USD 89.03-91.38/bbl ranges respectively. Dutch TTF surged by some 4% intraday and tested EUR 70/MWh this morning. “Tight supply entering the heating season leaves the market vulnerable to spikes higher later in the year”, ING says. Metals are flat/mixed with the complex somewhat cushioned by the softer USD despite the backdrop of higher energy prices. Spot gold moves closer to its 100 DMA to the downside (USD 4,370/oz) after dipping under Friday’s low (4,445/oz) to trade in a current USD 4,396-4,472/oz range. 3M LME copper trades in a narrow USD 14,223.68- 14,388.55/t. Central Banks
Riksbank Deputy Governor Jansson said Sweden’s inflation outlook has become more uncertain after unexpectedly high inflation readings this summer but the Riksbank's have scope to wait before adjusting monetary policy, even if there are some risks of elevated inflation going forward. Jansoon added that Sweden’s economic recovery could prove more persistent than expected but does not currently see signs that Sweden’s economy is at risk of overheating soon. New Zealand NZIER Shadow Board recommended the RBNZ hike the OCR by 25bps to 2.75% at its meeting this week. Geopolitics: Ukraine
The EU is to unveil "one of the biggest" Russia sanctions list in retaliation of hybrid threats, with the package to come alongside bilateral measures being prepared by Berlin, POLITICO reported citing sources. Ukrainian President Zelensky is to send top sanctions adviser to Capitol Hill this week in a bid to convince House lawmakers to drop their opposition to the Senate-passed Russia sanctions bill, Punchbowl reported. US Event Calendar
10:30 am: Aug Dallas Fed Manf. Activity, est. 1.6, prior 1.3
Tyler Durden Mon, 08/31/2026 - 08:39