Stocks Hit as Oil and Yields Surge – Nasdaq down 1.1%
US equity markets came under significant pressure in trading yesterday as Treasury yields surged and oil prices rebounded sharply amid renewed geopolitical concerns surrounding Iran and the Strait of Hormuz.
The Dow Jones fell 0.68% to close at 51,151, while the S&P 500 declined 0.75% to 7,706. Technology stocks experienced the heaviest selling, with the Nasdaq dropping 1.13% to finish the session at 26,936.
US Treasury yields moved sharply higher across the curve. The policy-sensitive 2-year yield jumped 12.2 basis points to 4.897%, while the benchmark 10-year yield climbed 15.3 basis points to 5.114%, reaching levels not seen since 2007. The significant move higher in yields provided further support for the US dollar, with the Dollar Index gaining 0.59% to close at 101.14.
Oil prices rebounded strongly as geopolitical risk returned to the forefront. Brent crude surged 4.16% to $103.38 per barrel, moving firmly back above the key $100 level, while WTI gained 2.40% to close at $92.72. The renewed rise in energy prices is likely to add to existing concerns over the global inflation outlook and the implications for central bank monetary policy.
Gold moved sharply lower as the combination of higher US Treasury yields and a stronger dollar outweighed demand generated by increased geopolitical uncertainty. The precious metal fell 1.55% to close at $4,287.04.
Oil in Focus as Iran Remains Defiant
Market volatility picked up sharply overnight as geopolitical concerns moved back to the top of traders’ agendas following Iranian President Masoud Pezeshkian’s address to the United Nations.
Pezeshkian struck a defiant tone, reiterating Iran’s right to pursue nuclear energy for economic development and indicating that the Strait of Hormuz would remain closed while sanctions against Iran remain in place. The comments reduced optimism that diplomatic efforts in New York could deliver a near-term breakthrough and quickly increased risk premiums across global markets.
Oil was one of the biggest movers, with concerns over continued disruption to energy flows through the Strait of Hormuz pushing Brent crude back above the key $100-a-barrel level. The renewed move higher in oil also added to inflation concerns, particularly at a time when major central banks are already maintaining a more hawkish policy stance.
US Treasury yields surged, with the benchmark 10-year yield reaching levels not seen since 2007 and the 2-year trading above 5%, while the US dollar strengthened across the board to hit 2-year highs on the index. Equity markets came under pressure as investors reassessed the potential impact of higher energy prices, inflation and interest rates on the global economy.
Geopolitical developments are likely to remain a major driver of volatility in the coming sessions, with traders watching closely for any fresh diplomatic progress or further escalation in the Middle East, as well as any updates from the White House, where Presidents Trump and Xi meet.
Volatile Day Ahead for Markets
Traders are preparing for another potentially volatile session today, with the macroeconomic calendar becoming considerably busier. Australian employment and unemployment figures will be the main focus during the Asian session before attention turns to the Swiss National Bank’s interest rate decision and subsequent press conference in European trading.
Canadian retail sales and weekly US unemployment claims are scheduled for the US session. However, geopolitical developments are likely to remain a major driver of market sentiment, with Presidents Donald Trump and Xi Jinping due to meet at the White House. Any significant developments regarding trade, tariffs or efforts to de-escalate the conflict in the Middle East could generate substantial moves across global markets.
