Oil futures experienced a significant rally on Monday as escalating tensions between the United States and Iran re-ignited, leading to concerns over the flow of goods through the strategic Strait of Hormuz. US crude settled up 9.4%, or $6.73, to $78.14 a barrel, while Brent crude climbed 9.6%, or $7.29, to $83.30 per barrel. The conflict saw Tehran declaring closure of the strait, a vital artery for oil and gas shipping, with President Donald Trump responding by reinstating a blockade of Iranian shipping and demanding 20% payments on all cargo for protection. These actions intensified after both nations exchanged missile and drone attacks over the weekend.
The renewed hostilities and surging oil prices sparked fears of inflation, pushing US Treasury yields higher. The yield on the benchmark US 10-year note rose 5.06 basis points to 4.62% from 4.569% on Friday, while the 30-year bond yield increased by 3.31 basis points to 5.104%. The two-year note's yield, which is closely tied to Federal Reserve interest-rate expectations, saw a rise of 6.71 basis points to 4.275%, reaching its highest level since February 2025. This rise in bond yields reflects investor concerns that the Federal Reserve may be prompted to keep interest rates elevated for longer to combat potential inflationary pressures.
Global stock markets declined, with MSCI's gauge of stocks across the globe falling 0.9% to 1,116.28 points. On Wall Street, the Dow Jones Industrial Average dropped 0.3% to 52,498.64, the S&P 500 fell 0.8% to 7,515.34, and the Nasdaq Composite sank 1.6% to 25,873.18. Technology shares were particularly hard hit, especially those related to artificial intelligence and semiconductors. SK Hynix, a South Korean tech giant, saw its US-listed shares fall 9% following a strong Nasdaq debut on Friday, and its Seoul stock plunged 15.4%. Nvidia also fell 3.5%.
Precious metals also experienced a downturn, with spot gold falling 3% to $3,998.52 an ounce and spot silver decreasing 3.8% to $57.56 an ounce, attributed to worries about a higher-for-longer US interest rate environment. The US dollar index, which measures the greenback against a basket of major currencies, gained 0.26% to 101.32, with the euro down 0.32% at $1.1377.
