Stocks, Bonds Fall as War Shows No Signs of Easing: Markets Wrap
(Bloomberg) — Turmoil in the Middle East sparked fresh losses across stocks and bonds amid worries about the spillover effects of elevated energy costs to inflation and economic growth, with hostilities showing no signs of a letup.
The S&P 500 fell about 1%, set for its the longest weekly slide in a year. The drop accelerated as the Wall Street Journal reported the Pentagon is deploying three warships and thousands of additional Marines. A rout in Treasuries deepened, with traders pricing in a 50% chance of a Federal Reserve hike by October. The UK’s 10-year yield hit 5% for the first time since 2008.
Brent topped $109, and was up nearly 6% this week. The dollar rose. Gold headed for its biggest weekly loss since 1983.
Markets have been rocked by disruption to supply out of the Persian Gulf, with the Strait of Hormuz near a standstill. President Donald Trump lashed out at military allies for not joining the war on Iran or helping to unblock the waterway, with the Islamic Republic keeping up attacks on Gulf energy assets.
The US is considering an operation to take over Kharg Island, Iran’s major oil-export site, to pressure the Islamic Republic to revive the Strait, Axios reported.
“Some investors can be hesitant to maintain their positions heading into the weekend when more negative headlines from the Middle East can emerge,” said David Laut at Kerux Financial.
Fed Governor Christopher Waller said he’s cautious about how elevated oil prices will impact inflation, though jobs weakness may still warrant rate cuts. Fed Vice Chair for Supervision Michelle Bowman told Fox Business she supports three reductions in 2026 and expects strong growth, but is keeping an eye on the war.
“The Fed is caught between slowing growth and renewed inflation pressure, with neither side clearly dominant,” said Julia Hermann at New York Life Investment Management.
Friday’s “triple witching” might be adding to the market instability. Roughly $5.7 trillion in notional options tied to individual US stocks, indexes and exchange-traded funds were estimated to expire, according to Citigroup Inc.
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“The stock market remains in negative territory for the year, and has made new 2026 lows this week, which suggests that the market may not have yet found its bottom and is still in the process of sorting out and pricing in the duration of the Middle East conflict,” said Laut.
Since the outbreak of the war, the S&P 500 has fallen about 4.5%, heading toward its fourth straight week of losses. Traditional havens are not protecting investors, with bonds losing value as traders react to inflation and federal budget concerns while gold has tumbled, noted Mark Hackett at Nationwide.
Money market funds are the safe haven of choice, Hackett added, suggesting investors are parking money on the sidelines rather than engaging in a structural allocation shift.
“Our recommendation for long-term investors is clear: Stay invested,” said Mark Haefele at UBS Global Wealth Management. “History shows that attempts to ‘market time’ geopolitical events often result in failure.”
Bond traders are scrambling for a new strategy after the oil shock triggered scuppered a popular wager on Fed cuts. By Friday, sentiment had flipped to such a degree that traders now bet the central bank might need to hike to combat inflation.
“We disagree with this assessment as the spike in oil prices should delay Fed rate cuts amid stagflationary pressures, but a sufficient move higher in oil could create a financial conditions shock that may require the Fed to respond with cuts,” said Gennadiy Goldberg at TD Securities.
Corporate Highlights:
FedEx Corp. raised its full-year profit forecast, signaling the plan to restructure its delivery network is gaining traction. The US charged a Super Micro Computer Inc. co-founder with illegally diverting billions of dollars in Nvidia Corp.-powered servers to China. Nvidia Corp.’s $20 billion licensing deal with Groq is being probed by a pair of Democratic senators over whether it violates antitrust laws. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.7% as of 1 p.m. New York time The Nasdaq 100 fell 1.1% The Dow Jones Industrial Average fell 0.3% The Stoxx Europe 600 fell 1.8% The MSCI World Index fell 0.8% Currencies
The Bloomberg Dollar Spot Index rose 0.4% The euro fell 0.2% to $1.1563 The British pound fell 0.8% to $1.3329 The Japanese yen fell 0.9% to 159.22 per dollar Cryptocurrencies
Bitcoin fell 0.9% to $69,867.76 Ether fell 0.3% to $2,140.3 Bonds
The yield on 10-year Treasuries advanced 12 basis points to 4.37% Germany’s 10-year yield advanced eight basis points to 3.04% Britain’s 10-year yield advanced 15 basis points to 4.99% Commodities
West Texas Intermediate crude rose 2% to $97.43 a barrel Spot gold fell 1.4% to $4,584.22 an ounce ©2026 Bloomberg L.P.
