US Stock Futures Decline on Iran Tensions as Q2 Earnings Season Begins

U.S. stock futures pointed to a lower open on Monday, with technology shares leading the decline, as escalating military hostilities in the Middle East prompted a risk-off response from investors. The geopolitical flare-up comes at a critical time for markets, which are bracing for a wave of second-quarter corporate earnings this week.

By 05:45 ET, Nasdaq 100 Futures were down 0.9%, while S&P 500 Futures fell 0.25%. In contrast, Dow Jones Futures were up marginally by 0.12%, according to Investing.com data.

Geopolitical Tensions Rattle Markets

The negative sentiment follows reports of renewed military exchanges between the United States and Iran over the weekend. U.S. Central Command (Centcom) stated it had launched more attacks on Iran, with subsequent reports indicating Tehran had retaliated against U.S. bases in the region.

Adding to market uncertainty were conflicting statements regarding the Strait of Hormuz, a vital waterway for global oil shipments. While Tehran reportedly claimed the strait was closed to commercial shipping, Centcom asserted that it remained open. The developments have pushed oil prices higher, renewing concerns about energy-driven inflation that could complicate the Federal Reserve's policy outlook.

Tech Stocks Retreat, Earnings in Focus

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The sharp drop in Nasdaq futures signals a potentially volatile session for the technology sector, following a significant selloff in Asian chipmaking stocks overnight.

• SK hynix, a major South Korean chipmaker, saw its shares fall as much as 14% in Seoul. The decline represented a sharp reversal after the company's American Depository Receipts (ADRs) surged nearly 13% in their Nasdaq debut on Friday.
• The pullback reflects investor anxiety over high valuations in the artificial intelligence space and profit-taking ahead of key earnings reports from industry leaders ASML Holding and Taiwan Semiconductor Manufacturing Co (TSMC) this week.

Earnings Season Kicks Off

The geopolitical turmoil threatens to overshadow the start of the Q2 earnings season, which is widely seen as a fundamental test for lofty equity valuations. Investors will be scrutinizing corporate profits and outlooks for signs of resilience amid ongoing economic and political disruptions.

Major Wall Street banks are set to kick off the season on Tuesday, with reports due from JPMorgan Chase, Bank of America, Goldman Sachs, Wells Fargo, and Citigroup. Their results and commentary on consumer credit health will be closely watched. Later in the week, the calendar includes reports from Netflix, Johnson & Johnson, and UnitedHealth Group.