S&P 500 futures down 0.1%, Nasdaq futures down 0.2% as oil extends gains

U.S. stock futures declined modestly on Tuesday as oil prices surged to multiyear highs amid escalating tensions in the Middle East, reigniting inflation concerns ahead of the Federal Reserve's policy decision. S&P 500 futures fell 0.1%, while Nasdaq-100 futures dropped 0.2%, reversing an earlier tech-driven rebound seen in the prior session. The S&P 500 closed higher on Monday, gaining 0.25% to 6,716.09, but remained vulnerable to volatility as oil prices approached $100 per barrel, with Brent crude climbing 2.45% to $102.57.

The surge in energy prices, fueled by uncertainty over the U.S.-led effort to secure the Strait of Hormuz, has heightened fears of inflationary pressures, complicating the Fed's balancing act between growth and price stability. Deutsche Bank strategists noted oil volatility has reached pandemic-era levels, with implied volatility in oil options exceeding 100% on a one-month basis, while the S&P 500 has moved in near lockstep with oil since the start of the conflict.

Energy stocks outperformed, with APA and BP rising nearly 3%, while consumer discretionary shares also rallied as travel companies like Expedia and Delta Air Lines raised revenue guidance. However, investor positioning has weakened, with equity positioning slipping below neutral and high-yield bond funds recording significant outflows. The Fed is widely expected to hold rates steady on Wednesday but may emphasize vigilance against inflation risks.

Market participants remain focused on geopolitical developments and central bank responses, with the S&P 500 down approximately 5% from pre-conflict levels, mirroring historical drawdowns during major oil shocks.