Oil futures surged nearly 9% on Monday after renewed conflict between the United States and Iran escalated over the weekend, with Tehran announcing the closure of the Strait of Hormuz and President Donald Trump responding by reinstating the blockade of Iranian shipping. U.S. crude settled up 9.4% to $78.14 a barrel, while Brent settled at $83.30 per barrel, up 9.6%. Trump's proposal of a 20% fee for keeping the strait open further fueled market anxiety, with Brent crude briefly hitting $86.36 a barrel on Tuesday.
Global equities reacted negatively to the escalating tensions and rallying oil prices. MSCI's gauge of stocks across the globe fell 0.9% to 1,116.28. On Wall Street, the Dow Jones Industrial Average fell 0.3% to 52,498.64, the S&P 500 fell 0.8% to 7,515.34, and the Nasdaq Composite dropped 1.6% to 25,873.18. Technology shares, particularly semiconductor stocks, were the weakest sector.
Bond yields rose significantly as the U.S.-Iran hostilities and surging oil prices reignited concerns about inflation and its potential impact on Federal Reserve monetary policy. The yield on the benchmark U.S. 10-year note climbed 5.06 basis points to 4.62% from 4.569% on Friday, nearing its May high of 4.663%. The U.S. 2-year Treasury yield, which is sensitive to interest-rate expectations, rose 6.71 basis points to 4.275%, its highest since February 2025. Precious metals also saw declines, with spot gold falling 3% to $3,998.52 an ounce and spot silver decreasing 3.8% to $57.56 an ounce, due to worries about potentially higher-for-longer U.S. interest rates.
