Asian stocks fell on Monday, and bond yields across the globe rose as oil prices jumped more than 2%. This market movement is largely attributed to the resumption of military clashes between the U.S. and Iran, which has heightened worries about inflation. The conflict saw U.S. forces strike Iranian rocket launchers on Larak Island, to which Iran retaliated by attacking U.S. military targets in Jordan and reportedly hitting a tanker in the Strait of Hormuz.
Adding to market unease, hawkish comments from Federal Reserve Chairman Kevin Warsh at Jackson Hole boosted bets on a September Fed interest rate hike. Fed funds futures traders are now pricing in a 65% chance of a September rate hike, up from about 35% before Warsh's speech. Similarly, the European Central Bank is widely expected to hike rates in September, and there's a strong possibility of a Bank of Japan rate hike.
Brent crude futures rose by $2.39, or 2.71%, to settle at $90.49 a barrel, reaching its highest since August 25. U.S. West Texas Intermediate crude climbed $2.36, or 2.83%, to settle at $85.76. Yields on the benchmark U.S. 10-year Treasury note were up 3.6 basis points at 4.758%, touching a high of 4.768%, its highest since January 15, 2025. In Asia, Japan's Nikkei 225 fell 1.6%, Hong Kong's Hang Seng Index dropped 0.8%, and Shanghai Composite was down 0.4%.
