U.S. stock futures tumbled Tuesday, undoing a Monday equity comeback, as oil prices spiked again and traders began to worry the U.S.-Iran conflict could drag on longer than anticipated. Futures tied to the Dow Jones Industrial Average lost 906 points, or 1.9%. S&P 500 futures slipped 1.7%, while Nasdaq 100 futures were down 2.1%. Iranian Revolutionary Guard commander said the Strait of Hormuz — the world’s most vital transit route for crude oil — is closed and that Iran would set ablaze ships attempting the route, Reuters reported, citing Iranian media. There were other signs of the conflict deepening as it enters its fourth day:

  • The U.S. embassy in Riyadh, Saudi Arabia’s capital was hit by drones as Iran upped its attacks on the country. The State Department ordered evacuations of personnel from Bahrain, Iraq and Jordan.
  • Tehran-backed Hezbollah attacked Tel Aviv with missiles and drones.
  • Concerns are growing about how long Gulf states like the UAE can hold off the barrage of Iran missiles and drones with their air defenses.

President Donald Trump has warned that the conflict could continue for more than four weeks. The jump in energy prices was boosting Treasury yields on fears it may cause inflation to flare back up, just as U.S. investors are banking on more Federal Reserve rate cuts to boost the economy. Stocks staged a massive comeback on Monday, with the S&P 500 and Nasdaq erasing steep losses to close slightly higher. The Dow also closed well off its session lows. Investors, using the historical playbook on Wall Street around geopolitical conflicts, bought the dip on the notion the conflict would soon be resolved and not impact the economy. “After initially taking the Middle East war in stride on Monday, market anxiety ratcheted higher overnight amid concerns that a decapitated and leader-less Iranian government and military will execute a prolonged retaliatory response aimed at sowing chaos throughout the region by targeting key economic and energy infrastructure for weeks to come,” said Adam Crisafulli of Vital Knowledge in a note. “While the US and Israeli militaries have complete dominance in the region, they can’t knock out every cheap missile and drone fired off by Iran, especially since interceptor stockpiles are rapidly depleting.” But energy prices jumped again overnight as the conflict widened. Perhaps more concerning is the surge in European natural gas prices after Iran knocked out Qatar’s LNG production. European natural gas futures have surged 70% in two days. “Energy prices are surging further (especially European gas), placing upward pressure on global borrowing costs,” added Crisafulli. Tech stocks, which led the Monday intraday comeback, were lower in early trading Tuesday. Nvidia and Broadcom lost 2% each in premarket trading. U.S. memory stocks were also under pressure in the premarket and were poised to follow the notable declines seen in memory chip stocks in South Korea. Most of the stocks in the S&P 500 were in the red except for oil and energy stocks. Additionally, shares of Blackstone fell 5% after the Financial Times reported that its private credit fund saw $1.7 billion in net outflows in the first quarter. There were little places to hide Tuesday with gold prices also lower after Monday gains. The CBOE Volatility index, Wall Street’s fear gauge, jumped to its highest levels since November. U.S. Treasury yields rose on Tuesday as the U.S.-Iran conflict caused oil prices to surge for a second day. The benchmark 10-year Treasury yield rose more than 5 basis points to 4.107%. The 30-year Treasury bond added more than 4 basis points to a yield of 4.741%. The yield on the 2-year Treasury note was up more than 6 basis points at 3.551%. South Korea’s Kospi saw its worst day in 19 months, weighed down by heavyweights Samsung Electronics and SK Hynix that fell almost 10% and 12%, respectively, on Tuesday as trading resumed after a public holiday. The index tumbled 7.24% to 5,791.91. Other Asia-Pacific markets tumbled as the conflict in Iran continues to rage on for a fourth day, denting risk sentiment. Japan’s Nikkei 225 dropped 3.06%, weighed down by consumer cyclicals, to 56,279.1 while the Topix dipped 3.24% to 3,772.17. Hong Kong’s Hang Seng index was down 1.25% in its final hour of trading, while mainland China’s CSI 300 fell 1.54% to close at 4,655.9. Australia’s S&P/ASX 200 dropped 1.34% to finish at 9,077.3, after being one of the few markets on Monday to record a marginal gain. Crude oil and natural gas futures surged for a second day Tuesday, after Iran ordered the closure of the Strait of Hormuz and threatened to attack any tanker that tries to pass through the waterway. U.S. crude oil prices rose about 7%, or $5.02, to $76.31 per barrel by 8:30 a.m. ET, while global benchmark Brent jumped 7.3%, or $5.62, to $83.39 per barrel. Oil prices have soared more than 14% this week as tanker traffic through the Strait has ground to a halt. About 20% of global oil consumption passes the Strait with exports going primarily to China, India, Japan and South. Spot gold prices fell ​on Tuesday, sliding more than 4% at one point, as some investors favoured the ‌dollar rather than gold as a safe-haven from the impact of the U.S.-Israeli air war on Iran, and as traders trimmed rate-cut bets given inflation concerns. Spot gold was down 3.3% at $5,150.89 an ounce, after falling to its ​lowest since February 20 earlier. U.S. gold futures for April delivery lost 2.8% to $5,161.50. “The dollar ​is absolutely roaring away, as are U.S. Treasuries, and that’s providing a strong headwind ⁠to gold and particularly silver,” said independent analyst Ross Norman. Spot silver fell 9.1% to $81.31 an ounce ​after climbing to a more than four-week high on Monday.