US STOCKS-Wall St set for lower open as soaring crude prices fan inflation worries

Updates before markets open

By Johann M Cherian and Pranav Kashyap

March 9 (Reuters) - Wall Street's main indexes were set to open lower on Monday, as oil prices soared, exacerbating inflation fears as hostilities in the Middle East entered their tenth day.

Geopolitical tensions deepened after Iran named Mojtaba Khamenei, son of the late Ali Khamenei, as the supreme leader, signaling firm control of hardliners in Tehran.

Crude prices shot up to just under $120 a barrel but eased as governments, including those part of the Group of Seven (G7) and Saudi Arabia, began discussions to limit the jump in energy costs through increased supply.

The latest developments are likely to fuel stagflation fears as data last week showed a weakening U.S. jobs market , even as broader economic activity accelerated.

"Higher oil prices are playing into fears that inflation could take off to the upside once again. While the U.S. is unlikely to suffer supply shortages, unlike the UK, Europe and Asian-Pacific regions, it will be hit by higher prices, which are already showing up at the pumps," said David Morrison, senior market analyst at Trade Nation.

Travel stocks, which were pressured the most last week, were also the hardest hit on Monday.

Alaska Air ALK.N and United Airlines UAL.O, along with cruise stocks such as Carnival Corp CCL.N and Royal Caribbean Cruises RCL.N, dropped 3% each in premarket trading.

Big banks, the backbone of any economy, also took a hit with Morgan Stanley MS.N and Citigroup C.N down over 2% each.

A prolonged period of higher oil prices could weigh on equities this year, Goldman Sachs said, warning that every one percentage point drop in economic growth could cut S&P 500 earnings by as much as 4%.

Higher energy prices lifted energy names including Diamondback FANG.O and APA APA.O both up over 2%, while Occidental OXY.N added 1.5%.

At 8:47 a.m. ET, Dow E-minis YMcv1 were down 607 points, or 1.28%, and S&P 500 E-minis EScv1 were down 77.5 points, or 1.15%. Nasdaq 100 E-minis NQcv1 were down 304.75 points, or 1.24%.

The CBOE Volatility Index .VIX, Wall Street's fear gauge, was at 31.45, its highest since April.

Prices of traditional safe havens such as precious metals also came under pressure as investors rushed to the U.S. dollar <=USD. Shares of miners such as Endeavour Silver EXK.N and Barrick Mining B.N lost over 3% each.

Bucking the trend, defense companies such as RTX RTX.N climbed 1.4% and Northrop Grumman > added 1.7%.

The spike in energy costs complicates the work of global central banks, and for the Federal Reserve, inflation triggers are likely to become a greater focus.

Policymakers have signaled they will wait to assess the impact of the energy cost spike on the economy before deciding on the monetary policy. However, the two-year Treasury yield US2YT=RR rose and briefly touched its highest since late November, as investors priced in elevated interest rates.

Futures tracking the rate-sensitive Russell 2000 index RTYcv1 dropped 1.8% and briefly marked a 10% drop from all-time highs. A 10% fall is commonly seen as correction territory for indexes.

Friday's soft jobs report boosted expectations for a 25-basis-point interest rate cut in June. However, now traders have pushed those odds to potentially September or October, according to LSEG-compiled data.

Last week, the biggest declines were in the blue-chip Dow that logged its steepest weekly drop since early April 2025, while the Russell 2000 .RUT posted its biggest weekly loss since early August.

Markets face a data-heavy week, including job opening numbers, personal consumption expenditures - the Fed's preferred inflation gauge - and a second estimate of quarterly GDP.

(Reporting by Johann M Cherian, Pranav Kashyap; Additional reporting by Shashwat Chauhan and Utkarsh Tushar Hathi in Bengaluru; Editing by Mrigank Dhaniwala, Shinjini Ganguli and Maju Samuel)

((pranav.kashyap@tr.com; +919886482111;))