Global markets saw significant drops in stocks and bonds, while oil prices surged after renewed fighting between the US and Iran escalated concerns about disruptions in the Strait of Hormuz. West Texas Intermediate crude topped $90, marking a 5.9% increase to $90.82 a barrel, and Brent crude climbed over 5% to approximately $95 a barrel. This surge in oil prices fueled fears that inflation would reignite, leading to tighter monetary policy from central banks.
The S&P 500 fell 0.7% to 7,631.47, the Nasdaq 100 dropped 1.3%, and the Dow Jones Industrial Average decreased 0.8% to 52,766.88. Technology stocks, including Nvidia, Amazon, and Advanced Micro Devices, were particularly affected, with their values dropping 1.5%, 1.9%, and 2.4% respectively, due to their reliance on borrowing becoming more expensive. The MSCI World Index also declined by 0.7%.
Bond yields rose globally, with the yield on 10-year Treasuries advancing four basis points to 4.79%, its highest level since January 2025. Germany's 10-year yield increased two basis points to 3.34%, and Britain's 10-year yield surged 16 basis points to 5.22%, reaching levels not seen since 2007-08 for the 10-year and 1998 for 30-year bonds. Investors are demanding greater compensation to hold bonds due to concerns about inflation, government spending, and corporate borrowing for AI development. Money markets now indicate a 68.2% likelihood of a Federal Reserve rate hike in September, following Fed Chair Kevin Warsh's hawkish comments on inflation.
The Bloomberg Dollar Spot Index rose 0.2%, while the euro fell 0.2% to $1.1589, the British pound dropped 0.3% to $1.3512, and the Japanese yen decreased 0.3% to 160.22 per dollar. Cryptocurrencies also saw declines, with Bitcoin falling 2% to $77,247.48 and Ether dropping 2.4% to $2,412.93. Gold prices also fell 2.4% to $4,330.08 an ounce.
Analysts like Fawad Razaqzada of Forex.com noted that higher oil prices threaten to reignite inflation and tighten monetary policy, while Matt Maley at Miller Tabak commented that higher yields eventually impact stocks. Peter Boockvar, CIO of One Point BFG Wealth Partners, suggested that the market is finally paying more attention to rising interest rates.
