United States stock futures dropped on Sunday night (Monday AEST) after Donald Trump announced a naval blockade of the Strait of Hormuz, following the collapse of weekend peace talks between Washington and Tehran.
By 10:10 am AEST (12:10 am GMT), futures tied to the Dow Jones Industrial Average and the S&P 500 were both down around 1%, while Nasdaq 100 futures fell 1.2%, pointing to a weaker open for Wall Street.
“Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz,” Trump said in a Truth Social post.
“The Blockade will begin shortly. Other Countries will be involved with this Blockade. Iran will not be allowed to profit off this Illegal Act of EXTORTION.”
The announcement came after negotiations in Islamabad broke down, fuelling concerns that the U.S.-Iran conflict could escalate further and prolong disruptions to global energy markets.
U.S. Vice President JD Vance confirmed that talks ended without agreement, citing Iran’s refusal to halt its pursuit of nuclear weapons.
However, broader disagreements remain, including Tehran’s demands for control over the Strait of Hormuz, war reparations, and the release of frozen assets.
Pakistani officials indicated efforts may continue to revive discussions in the coming days.
The escalation triggered a sharp reaction in energy markets, with U.S. crude prices gapping higher at the start of trade. West Texas Intermediate rose 8.3% to US$104.55 per barrel.
U.S. Central Command said it would begin blocking maritime traffic in and out of Iranian ports from 10 am ET on Monday (2 pm GMT), while allowing vessels bound for non-Iranian ports to continue transiting the strait.
According to a report by The Wall Street Journal, Trump is also considering resuming military strikes following the breakdown in talks, citing officials familiar with the matter.
The latest developments come just days after optimism around a two-week ceasefire helped lift U.S. equities, with all three major benchmarks posting their strongest weekly gains since November.
The S&P 500 rose 3.6% over the week, while the Nasdaq climbed 4.7% and the Dow added 3%.
Attention now turns to the start of first-quarter earnings season, which could provide further direction for markets amid heightened geopolitical uncertainty.
Major U.S. banks are set to lead the reporting calendar, with Goldman Sachs scheduled to release results on Monday. Other financial heavyweights, including Citigroup, Wells Fargo, JPMorgan Chase, Morgan Stanley and Bank of America, are due to report later in the week.
