U.S. stock futures signal a sharply lower start to Tuesday’s session, raising the prospect of another early wave of selling after markets rebounded from steep losses to finish Monday mixed.

Investor anxiety over the deepening conflict in the Middle East is resurfacing, particularly as crude oil prices continue to surge. Brent futures have climbed above $80 per barrel, intensifying concerns that rising energy costs could reignite inflationary pressures.

The latest leg higher in oil follows reports that Iran has shut down the Strait of Hormuz in response to U.S. and Israeli strikes, while warning it would open fire on vessels attempting to navigate the strategic shipping lane.

Heavy declines in overseas markets are also weighing on sentiment and could spill over into U.S. trading. With little domestic economic data scheduled, thinner activity may amplify price swings and contribute to heightened volatility.

“Investors across the Atlantic are also starting to become more alarmed about the situation in the Middle East,” said Dan Coatsworth, head of markets at AJ Bell. “The suspension of LNG production in Qatar is a particularly sensitive pressure point and has seen gas prices surge globally.”

He added, “The longer oil and natural gas prices remain elevated, the greater the risk of a meaningful impact on inflation which could mean higher interest rates, an event that’s typically negative for equity markets.”

On Monday, equities opened sharply lower in response to developments in the Middle East but gradually regained ground as the session progressed. The major indexes climbed well off their intraday lows before ultimately closing narrowly mixed.

The Nasdaq reversed an early drop of as much as 1.6% to end up 80.65 points, or 0.4%, at 22,748.86. The S&P 500 edged higher by 2.74 points, less than 0.1%, to 6,881.62. Meanwhile, the Dow Jones Industrial Average slipped 73.14 points, or 0.2%, to 48,904.78.

The rebound reflected bargain-hunting activity, as investors stepped in following the early sell-off. The Dow, in particular, recovered after touching its lowest intraday level in two months.

Initial weakness had been driven by news that U.S. and Israeli forces carried out coordinated strikes over the weekend that killed Iranian Supreme Leader Ayatollah Ali Khamenei.

Iran responded with drone and missile attacks targeting several countries in the region, including Kuwait, the United Arab Emirates, Bahrain, Saudi Arabia, Oman and Qatar.

Tensions escalated further after Israel conducted airstrikes against Hezbollah positions in Beirut and other areas of Lebanon following cross-border projectile fire into northern Israel.

Speaking at the White House, President Donald Trump indicated the confrontation with Iran could last four to five weeks but emphasized that the U.S. has the “capability to go far longer than that.”

The military escalation drove oil prices sharply higher, compounding existing worries about inflation.

“Scenes in the Middle East have caused widespread nervousness across financial markets,” said Dan Coatsworth, head of markets at AJ Bell. “The U.S. attacks on Iran have caused oil prices to soar amid fears of disruptions to supplies, pushing up costs for businesses and consumers.”

He added, “If the issues persist then the market will start to worry about new inflationary pressures and that could lower expectations for near-term interest rate cuts.”

On the economic front, the Institute for Supply Management reported a modest slowdown in U.S. manufacturing growth in February. The ISM manufacturing PMI slipped to 52.4 from 52.6 in January, remaining above the 50 threshold that signals expansion. Economists had forecast a decline to 51.8.

Sector performance was mixed. Networking stocks rallied strongly, lifting the NYSE Arca Networking Index 3.7% to a record closing high.

Energy producers also benefited from the spike in crude prices, with the NYSE Arca Oil Index advancing 3.4%.

Natural gas, software and brokerage stocks posted solid gains as well. In contrast, airline shares fell sharply amid concerns that the conflict could disrupt global travel. The NYSE Arca Airline Index dropped 4.1% to its lowest close in two months.

Housing-related stocks also came under pressure, with the Philadelphia Housing Sector Index falling 2.0%.

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