Markets Drop Amid U.S.-Iran Stalemate. CPI Inflation Report Will Show

Stocks looked set to tumble on Tuesday as the stand-off between the U.S. and Iran dragged on, putting the market on edge ahead of an inflation reading that will make clear just how much the war in the Middle East is impacting the economy.

Futures tracking the Dow Jones Industrial Average slid 22 points, or less than 0.1%. S&P 500 futures declined 0.4% and contracts tied to the tech-heavy Nasdaq 100 dropped 0.7%.

The S&P and Nasdaq both eked out record highs on Monday as the rally in chip stocks rolled on. But President Donald Trump still gave investors reason to feel cautious when he said that the cease-fire between the U.S. and Iran was on “massive life support.”

The prospect of a drawn-out stalemate was driving up oil prices early Tuesday. Brent international futures climbed 2% to $106.33 a barrel and West Texas Intermediate U.S. prices rose 2.5% to $100.52 a barrel in early trading.

“Nothing has really changed, with talks ongoing albeit at painstaking pace, the overall path continuing to lead towards de-escalation, and the Strait of Hormuz still essentially closed,” said Michael Brown, strategist at the foreign-exchange brokerage Pepperstone.

“Although there is no cause for increased optimism, there is also no real cause for greater pessimism as of yet, with markets having already reconciled themselves with the aforementioned dynamic some time ago,” he added.

The Iran war wasn’t the only worry for the market. South Korea’s senior presidential secretary for policy Kim Yong-beom called for a social tax on artificial-intelligence profits late Monday, sparking a selloff in chip makers Samsung Electronics and SK Hynix. The flagship Kospi index closed 2.3% lower.

All that came ahead of the April consumer-price index print, expected to show headline inflation jumped 3.7% from a year ago. Jet fuel and gasoline prices have risen since the war in Iran started. The market is also gearing up for Trump’s summit with China's leader Xi Jinping, which starts on Thursday.