Sept 8 (Reuters) - U.S. stock index futures slipped on Tuesday as fresh hostilities in the Middle East sent oil prices to their highest since late July, deepening market gloom ahead of inflation data later this week.
The declines follow a roller-coaster stretch that saw investors rushing to readjust rate hike expectations after commentary from Federal Reserve Governor Christopher Waller and a stronger-than-expected jobs report.
The truncated week after the Labor Day holiday will be dominated by the Consumer Price Index report due on Friday and the Producer Price Index reading on Thursday.
Some investors have said inflation readings will hold more weight for the Fed's rate trajectory, given Chair Kevin Warsh's focus on bringing prices down.
"We continue to think the next few months' inflation data will be mild enough for a majority of members to refrain from tightening policy," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
Still, traders see a 60.6% chance of an increase this month, according to the CME FedWatch tool.
At 6:54 a.m. ET, Dow E-minis were down 403 points, or 0.75%, and S&P 500 E-minis were down 24 points, or 0.31%. Nasdaq 100 E-minis were down 11 points, or 0.04%.
WAR RISKS FRONT AND CENTER
Now in its seventh month, the U.S.-Iran war has remained an overhang on equities. Tensions flared up again in the region, raising the risk of a wider conflict.
Yemen's Tehran-backed Houthis attacked energy facilities and cities in U.S. ally Saudi Arabia on Tuesday, while Israel struck a southern Lebanese town early on Monday.
Brent crude futures rose 1.73% to $98.66 a barrel, their highest since July 24.
"The inflation picture is becoming murkier because of the rally in oil prices. The military activity is maintaining a significant risk premium in energy markets amidst the heightened possibility of deeper and more protracted disruptions to global supply," said Kyle Rodda, senior financial market analyst at Capital.com.
Energy stocks were higher in premarket trading, with Marathon Petroleum (MPC.N), opens new tab and Occidental Petroleum (OXY.N), opens new tab climbing 1.57% and 1.63%, respectively.
Elevated yields on risk-free U.S. Treasuries have also weighed on equities in recent weeks, by making it less attractive for investors to take on the added risk of buying stocks.
The yield on the benchmark 10-year Treasury note rose 2.03 basis points to 4.8043% on Tuesday.
Crypto stocks fell as bitcoin retreated from the $80,000 level. Coinbase (COIN.O), fell 1.37% while Strategy (MSTR.O), opens new tab was down 2.46%.
Chipmakers rose, helped by optimism toward AI. Intel (INTC.O), gained 3.98%, while Nvidia (NVDA.O), inched 0.28% higher.
"History shows that increased speculation and concerns about excess can carry on for some time without a correction materializing," wrote Ben May, director of global macro research at Oxford Economics.
Reporting by Niket Nishant and Tharuniyaa Lakshmi in Bengaluru; Editing by Joyjeet Das
