Stock futures fall after US strikes Iran, ending month-long lull

U.S. stock futures dropped on Monday following the country's first attack on Iran in weeks, causing oil prices to surge and heightening expectations that the Federal Reserve may raise interest rates at its upcoming September meeting. Dow Jones, S&P 500, and Nasdaq-100 futures experienced declines of 0.1%, 0.2%, and 0.1%, respectively, although all three major indexes were poised for monthly gains.

The Middle East's renewed tensions contributed to the market's downward pressure after the U.S. targeted Iranian missile systems poised to launch mines into the Strait of Hormuz. Oil prices surged over $88 per barrel due to fears of further conflict escalation. The ongoing war in Iran remains a significant factor in maintaining inflation concerns.

Fed Chairman Kevin Warsh, in a Jackson Hole speech, expressed that inflation was too high and that the central bank needed to act. Over the weekend, traders raised their bets on a 25 basis point rate hike at the next meeting to 62%, up from around 40% a week earlier. With earnings season concluding and a relatively quiet day of economic data on Monday, investors will focus on the Labor Department's monthly jobs report on Friday.

Tim Cook, Apple's CEO, is set to resign, passing the reins to hardware engineering senior vice president John Ternus. Apple's CEO has overseen the introduction of various products, including the Apple Watch, AirPods, and recently, the MacBook Neo, which has boosted Services segment revenue to over $100 billion. The CBOE Volatility Index (VIX) fell to 14.13 on Friday, marking its lowest level of 2026, a stark contrast to the spring when volatility spiked due to Iran war headlines.

Historically, the VIX tends to rise in late August, peak in mid-September, and reach around 19 by early October. However, this does not necessarily imply a stock market decline.