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By 06:40 ET (10:40 GMT), the Dow Futures contract was down 135 points, or 0.4%, S&P 500 Futures traded 23 points, or 0.5%, lower and Nasdaq 100 Futures dropped 105 points, or 0.7%.
The main indices on Wall Street closed last week on a high, as investors closed out short positions in the wake of a stronger than expected monthly employment report.
The 30-stock Dow Jones Industrial Average ended Friday almost 300 points, or 0.9%, higher, the benchmark S&P 500 gained 1.2%, while the tech-heavy Nasdaq Composite closed up 1.6%.
However, this positive tone has disappeared after the Israeli-Palestinian conflict escalated to full-blown war over the weekend, as Islamist group Hamas launched an assault on Israel, triggering violent conflict that left hundreds dead.
This resulted in oil prices surging, rebounding from a drop last week, as the strife deepened political uncertainty in the Middle East and exacerbated supply fears.
At 06:40 ET, the U.S. crude futures traded 3.9% higher at $86.00 a barrel, while the Brent contract traded 3.7% higher at $87.69.
This has fueled concerns that a prolonged crude rally will add to inflationary pressures, which could force central banks around the world to leave borrowing costs higher for a longer period of time.
Wall Street was already in a delicate state as investors contended with twin worries over inflation and elevated interest rates. Data last week showed a stronger-than-expected surge in the number of jobs added by the American economy during the month, heaping on to these concerns.
There is consumer inflation data for September due later this week, and hot numbers could reinforce the Fed’s message that interest rates need to remain higher for longer.
August’s CPI report showed the fastest increase in 14 months as the cost of gasoline surged, although core inflation, which excludes food and fuel costs rose at the slowest pace in nearly two years.
In corporate news, the third quarter earnings season starts in earnest this week, with banking giants JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) all due to report ahead of the market open on Friday.
Citigroup has already agreed to sell its retail wealth management portfolio in mainland China to HSBC (LON:HSBA), the lenders said in statements on Monday.
Other companies set to report during the week include snacks and beverages giant PepsiCo (NASDAQ:PEP) on Tuesday, Delta Air Lines (NYSE:DAL) on Thursday and insurer UnitedHealth Group (NYSE:UNH) on Friday.
Additionally, the Wall Street Journal reported that Nelson Peltz’s Trian Fund Management is expected to request multiple seats on the board of Walt Disney (NYSE:DIS), of which it owns around a $2.5 billion stake, with one of those seats reserved for Peltz.
(Oliver Gray contributed to this item.)
