- US stock futures fell sharply, with Nasdaq down over 1.5% in afternoon trading
- Brent crude prices surged nearly 3% amid strikes on Saudi oil infrastructure
- AI-linked stocks declined after OpenAI and Anthropic leaders called for slower AI progress
US stock futures came under heavy selling pressure on Monday, with Nasdaq futures falling more than 1.5% in afternoon trade, as a sharp rise in oil prices, renewed concerns over interest rates and weakness in AI-linked stocks weighed on investor sentiment.
At 4:40 am ET, Nasdaq futures were down 1.65%, while S&P 500 futures declined 0.7%. Dow Jones Industrial Average futures were relatively resilient, falling 0.24%.
Oil Prices Surge
A fresh jump in crude prices emerged as a major risk for global markets. Brent crude gained nearly 3% on Monday after fresh strikes targeting Saudi Arabia and ships in the Gulf raised concerns over further disruption to energy supplies.
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An attack on a Saudi oil pipeline and an advance by Yemen's Houthis added to supply worries. Brent crude had already gained nearly 9% last week, while US crude rose 2.6% to $102.62 a barrel.
Meanwhile, a meeting in Oman between Iran and Gulf Arab states, which was scheduled for Monday to discuss a potential agreement on reopening the Strait of Hormuz, was postponed.
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The uncertainty around the key shipping route has heightened concerns that a prolonged disruption could push energy prices higher and fuel inflation globally.
AI trade Reversal Hits Technology Stocks
The sell-off was particularly pronounced in technology and AI-linked shares, with Nasdaq futures bearing the brunt of the decline. Investor sentiment towards the AI trade weakened after the leaders of OpenAI and Anthropic called for a slowdown in AI development to better manage associated risks.
The comments have added to concerns that the rapid rally in AI-related stocks may have run ahead of fundamentals, prompting investors to reassess valuations and exposure to the sector.
The impact was also visible across Asian markets. Japan's Nikkei fell 1%, while South Korea's benchmark index dropped 3.2%, amid concerns over a slowdown in AI development.
Fed, Japan Rate Decisions In Focus
Markets are also bracing for potentially significant monetary-policy decisions in the US and Japan this week. The latest US consumer price report on Friday prompted traders to price in an 86% probability of a 25-basis-point rate hike by the Federal Reserve on Wednesday, with another increase expected by December.
If delivered, it would be the Fed's first rate hike since mid-2023.
Higher interest rates typically put pressure on growth and technology stocks by raising borrowing costs and reducing the relative attractiveness of future earnings. The prospect of renewed monetary tightening has therefore added another layer of pressure to already fragile market sentiment.
Investors will also closely watch the Bank of Japan's policy decision, with markets assessing the potential impact of higher Japanese rates on global liquidity and risk assets.
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