US Stocks and Treasuries Fall as Oil Pushes Higher: Markets Wrap
(Bloomberg) — US stocks and Treasuries fell as fading optimism for an imminent breakthrough in the Iran war drove oil prices higher, reigniting worries that inflation is heating up.
Tehran’s refusal to budge on its demands for reopening the Strait of Hormuz and mixed signals from President Donald Trump on further talks sent Brent toward $107 a barrel, even after the resumption of flows through Saudi Arabia’s East-West pipeline eased some of the pressure. Treasuries slid across the curve, with five-year yields rising six basis points to 5.04%.
Nasdaq 100 futures fell 0.6%, while those for the S&P 500 dipped 0.4%. Nvidia Corp. bucked a broader retreat in chipmakers after boosting its buyback program. The dollar resume its advance. Gold fell by the most in a month, putting mining stocks under pressure.
Investors are assessing geopolitical risks and growing price pressures at a time when corporate profitability is still robust and major economies show resilience. For now, oil is keeping yields near multi-year highs, with pressure from the bond market feeding through to other asset classes.
“A lot is moving against equities at the moment: oil is on the rise and bond yields are going through the roof,” said Laurent Lamagnere at AlphaValue. “It’s quite hard for me to be optimistic.”
The growing prospect of rate hikes saw gold extend its losses for September to more than 6%. Rising yields have dimmed the allure of the precious metal, which pays no interest. Investors see about a 65% probability of a Federal Reserve rate increase next month and lean toward four quarter-point hikes over the next 12 months.
The recent spike in yields means that month-end reallocations by balanced US equity-bond funds could weigh on stocks in the near term, according to Christopher Dembik, senior investment adviser at Pictet Asset Management.
“Around $25 billion to $30 billion worth of equities are expected to be sold, with the proceeds reinvested in bonds,” Dembik said. “This could put some downward pressure on US large caps over the next few trading sessions.”
Data due later this week are likely to give investors more reason to worry that price pressures are building. A report on Wednesday is forecast to show a 0.5% increase in August inflation-adjusted personal spending, which would be the biggest advance in just over a year.
The release will also include the Fed’s preferred inflation gauges. Both the personal consumption expenditures price index and the core measure — which excludes energy and food — are projected to quicken in August from a month earlier. Friday’s payrolls data will probably show that hiring remained solid.
In the UK, shares in homebuilders surged after the government announced a loan program to help first-time buyers. Taylor Wimpey Plc rose 11%, while Persimmon Plc rallied 15% and Barratt Redrow Plc advanced 12%.
What Bloomberg Strategists Say:
“Gold is adding to its recent declines, in keeping with its inverse correlation to moves in the oil complex as bond-market investors take on the role of tightening conditions on behalf of central banks. Given a structural reset of global interest rates higher, gold’s funk looks set to linger longer this time around.”
Corporate News:
Paramount Skydance Corp. intends to offer about $44.4 billion US dollar-denominated senior secured first lien notes and US dollar- and euro-denominated senior secured second lien notes. Nvidia Corp. introduced a new double-layered artificial intelligence security system that it says would’ve prevented the recent high-profile breach of Hugging Face by OpenAI’s AI models. TotalEnergies SE pledged to boost its dividend by more than 5% a year through 2030 and boosted its share buybacks as the French energy major benefits from rising oil and gas output and surging prices. SK Hynix Inc. shares fell as reports of a potential listing of the chipmaker’s US subsidiary added to concerns over its complex ownership structure. Nu Holdings Ltd. has held discussions to acquire UK digital bank Monzo Bank Ltd., according to people with knowledge of the matter. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.4% as of 8:30 a.m. New York time Nasdaq 100 futures fell 0.6% Futures on the Dow Jones Industrial Average fell 0.4% The Stoxx Europe 600 rose 0.4% The MSCI World Index was little changed Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.1% to $1.1374 The British pound was little changed at $1.3260 The Japanese yen rose 0.1% to 157.08 per dollar Cryptocurrencies
Bitcoin fell 1.4% to $83,312.2 Ether fell 0.3% to $2,677.9 Bonds
The yield on 10-year Treasuries advanced four basis points to 5.20% Germany’s 10-year yield advanced three basis points to 3.63% Britain’s 10-year yield advanced two basis points to 5.39% Commodities
West Texas Intermediate crude rose 2.9% to $95.08 a barrel Spot gold fell 3.1% to $4,151.60 an ounce This story was produced with the assistance of Bloomberg Automation.
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