Stock futures dropped Sunday evening following U.S. military strikes on Iranian rocket launchers located on Larak Island in the Strait of Hormuz, heightening concerns about further geopolitical instability. The Dow Jones futures slipped by 85 points, or 0.16%, with similar declines in the S&P 500 and Nasdaq-100 futures. In Asia, markets also retreated, with South Korea’s Kospi plunging 3.5% and Japan’s Nikkei 225 falling over 2%. The disruptions added to the tense backdrop as global investors digest the latest developments in the Middle East.

Despite recent volatility, the U.S. stock market is positioned to close August with gains, largely driven by strong performances in the technology sector. The Dow is on track for its fifth consecutive monthly advance, up 2.1% so far this month. The S&P 500 and Nasdaq Composite are each recording their first monthly increases since May, up approximately 3% and 4%, respectively. Notably, tech giants linked to artificial intelligence have fueled these gains, with Nvidia climbing over 8%, Microsoft rising 11%, and Micron Technology up 13% during August.

Inflation concerns continued to shape market sentiment through August, as Treasury yields reached multiyear highs amid persistent worries about price pressures. The Treasury Department has responded by increasing debt repurchases to stabilize markets, but yields on longer-dated debt remain elevated. Federal Reserve Chairman Kevin Warsh recently expressed unease over inflation trends, signaling that further interest rate hikes might occur in September and December. Barclays economist Jonathan Millar noted that the Fed’s stance is increasingly hawkish, with a 25 basis point hike in September seen as likely.

The strike on Iranian launchers also caused crude oil prices to surge due to fears of supply disruptions. U.S. West Texas Intermediate futures climbed over 2% to above $85 per barrel, while Brent crude rose to nearly $90 per barrel. The strategic Strait of Hormuz, a critical channel for global oil shipments, remains a flashpoint as tensions continue into the seventh month of conflict in the region. Upcoming economic data releases, including the August jobs report and sector-specific activity indices, will offer fresh insights into the U.S. economy amid this uncertain global environment.