NEW YORK: US stock index futures slid on Wednesday, with Nasdaq futures touching a four-week low, after President Donald Trump said the interim deal aimed at ending the war with Iran was "over", sending oil prices surging and investors scrambling for safety.
Speaking in Ankara ahead of a NATO summit in the Turkish capital, Trump said he had no interest in engaging further with Iran, deepening investor concerns over renewed escalation in the Middle East and marking the latest blow to the fragile ceasefire between Washington and Tehran.
Oil prices extended gains on Wednesday following Trump's remarks, with Brent crude futures and US West Texas Intermediate crude futures both rising more than 6 per cent.
"It's a big wake-up call for the markets because the expectation was that following the MOU, we were likely to start to see the flow of oil coming back into the markets. And we saw inflation expectations being dialled down," said Aneeka Gupta, director of macroeconomic research at WisdomTree.
"The way we're looking at it now is what has changed materially is the (Iranian) oil waiver is gone. It has removed a very key incentive for Iranian compliance."
The jump in crude prices lifted energy stocks in premarket trading. Chevron rose 2.8 per cent, Exxon Mobil gained 2.6 per cent and ConocoPhillips advanced 2.9 per cent.
Devon Energy climbed 2.5 per cent, while Occidental Petroleum, APA Corp and Diamondback Energy were up 2.5 per cent, 3 per cent and 3.8 per cent, respectively.
Travel stocks fell as higher oil prices stoked concerns over fuel costs and demand.
United Airlines dropped 4.2 per cent, Southwest Airlines lost 3.3 per cent and Delta Air Lines fell 3.2 per cent.
Cruise operators also slipped, with Carnival down 3.1 per cent, Royal Caribbean 3.2 per cent and Norwegian Cruise Line 2.5 per cent.
At 6.09am ET, Dow E-minis were down 712 points, or 1.34 per cent, and S&P 500 E-minis were down 80 points, or 1.06 per cent. Nasdaq 100 E-minis were down 450 points, or 1.55 per cent.
Small-cap Russell 2000 index futures fell 1.5 per cent to a three-week low. The CBOE Volatility Index, Wall Street's fear gauge, hit an over one-week high, climbing 2.5 points to 18.63.
The latest escalation puts pressure on the US equity rally that is already showing signs of fatigue, as higher oil prices threaten to revive inflation concerns and complicate the Federal Reserve's path.
The Fed's June policy meeting minutes are due later in the session. They could provide clues on how policymakers are assessing inflation risks and economic growth.
According to CME's FedWatch tool, markets are currently pricing in at least one rate hike by the end of 2026.
Technology stocks were also under pressure after a volatile stretch for the sector in recent weeks.
Broadcom pared some declines and was last down 0.7 per cent after Apple said it plans to spend more than US $30 billion as part of a chip-supply agreement reached earlier this week with the chipmaker.
Chip stocks were broadly lower, with the iShares Semiconductor ETF down three per cent.