(Bloomberg) -- US equity-index futures fell and oil extended gains after President Donald Trump signaled a sharp escalation in the Iran war, heightening the risk of an energy shock already weighing on the global economic outlook.

Futures contracts for the S&P 500 Index retreated 0.2% as traders trimmed bets in equities on concern the higher energy prices will fan inflation and hurt economic growth. Brent rose 2% to trade above $111 a barrel as trading started on Monday, taking gains this year to more than 80%. Gold fell 1% to about $4,630 an ounce. The Bloomberg Dollar Spot Index rose 0.1%.

Trump renewed threats early Sunday to attack Iranian infrastructure if the key energy-shipping route through the Strait of Hormuz remains closed. He followed it later with another that said: “Tuesday, 8:00 P.M. Eastern Time!” with no further explanation.

The president’s comments came as OPEC+ warned that damage to Mideast energy assets will have a prolonged impact on oil supply even after the conflict ends. Yet there are few signs of progress toward a ceasefire as attacks have continued to flare around the region, keeping oil prices hovering well above $100 a barrel.

“The prediction game remains quite tricky for investors,” said Homin Lee, a strategist at Lombard Odier in Singapore. “Investors’ focus will squarely be on military actions on both sides of the Persian Gulf and whether or not Hormuz vessel crossings can improve further despite these attacks.”

The fallout from the war has rapidly darkened the economic outlook by threatening to cool growth and push up already elevated inflation, roiling bets on whether the Federal Reserve will resume cutting interest rates later this year. Attention remains firmly on energy prices and the closure of the Strait of Hormuz — a waterway crucial for the flow of oil from the Middle East.

Investors will watch for the impact of the surge in crude oil when monthly US inflation data is released Friday. The roughly $1-per-gallon increase in US gasoline pump prices probably drove the March consumer price index up 1%, the most since the post-pandemic inflation surge in 2022, according to an economist survey before the report is published.

What Bloomberg strategists say...

Global investors will be keeping to a defensive posture as President Donald Trump issued threats to destroy Iran’s power plants. The narrative of weaker stocks and bonds, amid a strong dollar is set to prevail as traders see the Iran war in an escalation mode with no immediate sign of an off-ramp.

— Mark Cranfield. MLIV. For full analysis, click here.

The S&P 500 is coming off its biggest weekly gain of the year, a 3.4% jump fueled by short covering and speculation early in the week that Trump was poised to begin wrapping up US military operations. The gains left the index just 5.7% below its January record.

But on Thursday, the last trading day of the holiday-shortened week, US stocks initially opened lower after Trump’s televised evening address dashed optimism he would layout a solid timeline for concluding the war. Equities later recovered the losses on reports that Iran was talking with Oman about ways to handle shipping traffic through Hormuz.

Even so, West Texas Intermediate crude ended above $110, rising 11% Thursday, while the global Brent benchmark settled near $109. Meanwhile, OPEC+ warned that damage to Middle East energy assets will have a prolonged impact on oil supply even after the Iran war ends, as it approved a symbolic increase in output quotas for next month.

Meanwhile, on Friday, US Treasuries fell after a stronger-than-forecast reading on March employment prompted traders to pare bets on Fed rate cuts. That marked a shift from much of last week, when bonds gained as the attention shifted from the inflation implications of the energy-price spike to speculation that rising costs to consumers and businesses will slow the pace of growth.

Yields on two-year Treasuries climbed four basis points to 3.84%. The US added 178,000 jobs last month, higher than all estimates in a Bloomberg survey.

“This makes it somewhat less likely that the fed will be pushed into ‘bad news’ cuts motivated solely by labor weakness,” Krishna Guha, head of central bank strategy at Evercore ISI, wrote in a note. “The fall in unemployment pre-war does edge up the risk of a Fed hike, but we continue to think this is very unlikely in 2026.”

Meanwhile, the Islamic Republic’s continued attacks damaged Kuwait’s oil headquarters and shut down an Emirati petrochemicals plant. Fifteen ships have passed through the Strait of Hormuz with permission from Iran, semi-official Fars news agency reports, citing the latest data on strait traffic.

Trump has previously dialed back his escalation threats, including two weeks ago before markets reopened for the week. Trump also said he plans to hold a news conference at 1 p.m. New York time on Monday.

“Trump is probably serious in his expressed desire to step away after two or three more weeks,” Lombard Odier’s Lee said. “But the obvious path-dependency inherent in the conflict suggests that his attempt to carry out a final round of aggressive strikes can backfire significantly for the markets.”

Corporate News:

Hon Hai Precision Industry Co. reported a 29.7% rise in quarterly sales, a sign of sustained AI demand during the first weeks of war in the Middle East.

Deutsche Lufthansa AG sees potential bottlenecks for jet fuel availability should the conflict in the Middle East turn into a longer war.

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.3% as of 8:05 a.m. Tokyo time

Currencies

The Bloomberg Dollar Spot Index rose 0.1%

The euro was little changed at $1.1514

The Japanese yen was little changed at 159.66 per dollar

The offshore yuan was little changed at 6.8868 per dollar

Cryptocurrencies

Bitcoin rose 1.1% to $68,363.63

Ether rose 0.8% to $2,084.8

Commodities

West Texas Intermediate crude rose 1.5% to $113.18 a barrel

Spot gold fell 0.9% to $4,634.29 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Chris Nagi.

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