NEW YORK (AP) โ Oil prices are rising and stocks are falling as violence in the Middle East injects more unease into financial markets around the world. The S&P 500 fell 0.4% early Monday in its first trade since Hamas launched a surprise attack over the weekend on Israel, which then formally declared war. The Dow Jones fell 4 points and the Nasdaq composite lost 1%. The conflict area is not home to significant oil production, but fears that the fighting could spill over into politics around the crude market sent the barrel of US oil up 3.6%. Shares of oil and defense companies rose.
THIS IS A BREAKING NEWS UPDATE. AP's previous story follows below.
Wall Street fell in premarket trading on Monday as crude oil prices rose after the Israeli government declared war following the death. Hamas attacks from the Gaza Strip.
S&P 500 futures fell 0.6% before the bell, while Dow Jones industrials futures fell 0.5%.
The bond market in the US is closed on Monday for the Columbus Day holiday, but the New York Stock Exchange and Nasdaq will be open.
Oil prices rose more than $3 a barrel. Conflicts in the Middle East often drive up oil prices given the risk of supply disruptions.
"Disruptions or escalations in the region can have far-reaching implications for energy markets, global supply chains and geopolitical dynamics," Stephen Innes of SPI Asset Management said in a note.
The fighting has yet to have any discernible impact on oil production, but geopolitical escalations in the Middle East typically lead to a "buy first, ask later" response, he said.
Oil prices had retreated from highs around $90 last month in recent days, falling sharply last week. Early Monday, U.S. benchmark crude oil rose $3.35 to $86.14 a barrel in electronic trading on the New York Mercantile Exchange. On Friday he earned 48 cents.
Brent crude, the price basis for international trade, rose $3.32 to $87.90 a barrel.
Geopolitical tensions also led to a surge in U.S. military contractors early Monday. Northrop Grumman and RTX rose 3.6% each, while Lockheed Martin jumped 4.6%.
In stock markets, shares of travel and leisure companies, such as airlines and cruise ships, plummeted. American, United and Delta suspended service to Israel as the US State Department issued travel warnings for the region citing potential for terrorism and civil unrest.
Major airlines fell 2% to 3% before the bell, while cruise lines Carnival and Norwegian lost just under 3%.
Tel Aviv's main stock benchmark index fell 0.4%. It closed down 6.5% on Sunday after the attacks. Early Monday, Israel's Central Bank said it would sell up to $30 billion in foreign currency to shore up the shekel, which fell to its lowest level in nearly eight years. It also said it will provide up to $15 billion to support market liquidity.
The shekel was virtually unchanged on Monday at 3.8596 shekels per dollar.
In times of war, the US dollar is often sought as a safe haven, as is gold. The price of gold rose 1% early Monday to $1,863.40 an ounce.
At midday in Europe, the German DAX, the CAC 40 in Paris lost 0.4% and the FTSE 100 in London all fell 0.8%.
In Asian trading, Shanghai reopened after a week-long holiday, falling 0.4% to 3,096.92. Hong Kong's Hang Seng gained 0.2% to 17,486.48. Its market reopened for business in the afternoon after being closed in the morning due to typhoon warnings.
Australia's S&P/ASX 200 rose 0.2% to 6,970.20. India's Sensex fell 0.7% and in Bangkok the SET fell 0.6%.
Tokyo and several other Asian markets were closed for holidays on Monday.
The death toll from fighting in the Middle East in two days exceeded 1,100 dead and thousands injured on both sides. Palestinian militant groups claimed to have more than 130 captives on the Israeli side. Israel's declaration of war raises the question of whether it would launch a ground attack on Gaza, which in past situations has led to heavy casualties.
US Secretary of Defense Lloyd Austin ordered the Ford Carrier Strike Group sail to the eastern Mediterranean to be ready to assist Israel, in a move intended to help deter any regional expansion of the conflict.
On Friday, Wall Street rallied after investors studied the nuances of a surprisingly strong report on American employment that initially sent stocks tumbling over fears that upward pressure on inflation would lead the Federal Reserve to keep interest rates high.
The S&P 500 rose 1.2%, the Dow Jones rose 0.9% and the Nasdaq composite rose 1.6%.
This week's reports on inflation at both the consumer and wholesale levels are the next big data to be released before the Federal Reserve makes its next interest rate announcement on November 1.
A strong labor market also carries some rewards for financial markets in the short term. It means the economy continues to perform well despite high rates, which could support corporate profits.
This week will mark the unofficial start of the S&P 500 earnings reporting season, with Delta Air Lines, JPMorgan Chase and UnitedHealth Group among the big companies scheduled on the calendar.
In other currency trading, the dollar rose to 149.16 Japanese yen from 149.11 yen late Friday. The euro fell to $1.0528 from $1.0553.
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AP writer Jon Gambrell in Jerusalem contributed.
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