US stock futures are indicating a negative start to Tuesday’s trade on May 12, as the ceasefire situation in the Middle East appears increasingly fragile, keeping crude oil prices elevated. At the same time, the record-breaking rally in chip stocks cooled.
Nasdaq 100 futures fell 0.8% after a strong rally in chipmakers had pushed the index to back-to-back record highs. S&P 500 futures slipped 0.4%, while Dow Jones Industrial Average futures declined 0.03%.
US equities are coming off a strong run. The S&P 500 and Nasdaq had just posted their sixth consecutive weekly gain, with both indices ending Friday at fresh record highs as better-than-expected corporate earnings signalled that the US economy was continuing to hold up well.
Tensions in the Middle East are expected to escalate again after US President Donald Trump said the month-old ceasefire with Iran was “on life support,” following Tehran’s response to a US proposal aimed at ending the conflict, which highlighted that both sides remain far apart on key issues.
Trump over the weekend rejected Iran’s response to the US peace proposal, raising concerns that the conflict could drag on and continue disrupting shipping through the Strait of Hormuz. Iran on Sunday reportedly released a proposal to end the war on all fronts, which included demands for compensation for war damages and emphasised Iranian sovereignty over the Strait of Hormuz.
Technology stocks are now taking a breather amid growing concerns that the recent AI-driven rally may have run too far, too fast. The ongoing impasse between the US and Iran is also weighing on sentiment, with the Strait of Hormuz remaining effectively shut after more than two months of war and failed diplomatic efforts.
Meanwhile, the annual inflation rate in the US has accelerated to 3.8% in April 2026, the highest level since May 2023, compared to 3.3% in March, as the oil shock triggered by the Iran conflict continues to fuel price pressures.
The war has pushed Brent crude prices nearly 50% higher from pre-war levels of around $70 per barrel, adding to inflationary pressures across the global economy.
Crude oil prices extend rally
Brent crude futures extended their winning streak to a third straight session, surging nearly $4 to cross the $108 per barrel mark after rallying 3% in the previous session. Meanwhile, WTI crude futures climbed above $101 per barrel, touching an intraday high of $102.05.
The rebound in oil prices has revived concerns that escalating tensions in the Middle East could once again spill over into inflation, supply chains, and broader market volatility.
Semiconductor stocks weaken amid inflation
Vested Finance said that the AI-driven rally is beginning to show signs of fatigue, particularly in semiconductor stocks that had led the market rally this year. It noted that chipmakers across Asia, Europe, and the US in futures trading witnessed renewed pressure, while South Korean technology giants such as Samsung Electronics and SK Hynix declined sharply amid concerns over potential new taxes on AI-related profits.
“That matters because semiconductors have been the backbone of this entire market rally since the launch of ChatGPT,” Vested Finance said.
The brokerage added that markets remain heavily concentrated in a handful of AI-linked winners even as oil prices, inflation risks, and geopolitical uncertainty continue to intensify in the background.
“For now, investors are hoping inflation cools enough to keep the rally alive. But if oil keeps climbing and inflation starts spreading beyond energy, the pressure on equities — especially tech — could increase very quickly,” Vested Finance added.
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