Stocks Drop, Oil’s Rise Fans Inflation Concerns: Markets Wrap

(Bloomberg) — Asian stocks fell as a surge in oil prices linked to the Middle East conflict fueled inflation concerns, sending bonds lower and prompting traders to scale back bets on interest-rate cuts. The dollar and gold gained on haven demand.

The MSCI Asia Pacific Index dropped 1.2%, with the Kospi gauge in South Korea — the world’s second-best-performing market this year — falling 2.3% upon return from a long weekend. Futures contracts for the S&P 500 Index slipped 0.4%, indicating stocks may remain under pressure.

Traders remained focused on oil with the commodity extending gains as the US and Israel stepped up their war against Iran, while Tehran threatened a full closure of the Strait of Hormuz — a crucial waterway for the movement of oil. Brent rose toward $79 a barrel after spiking about 7% on Monday.

Yields on the benchmark 10-year Treasury edged up one basis point to 4.04% as concerns that rising energy costs would fan inflation prompted traders to curtail expectations of easing by the Federal Reserve.

Traders are now fully pricing in a first US rate cut in September, with expectations for a third reduction in 2026 nearly fading. That shift comes on top of global equity markets already unsettled by the billions companies are pouring into artificial intelligence and concerns over the technology’s disruptive impact.

“There are more questions than answers right now,” said Chris Larkin at E*Trade from Morgan Stanley. “A stabilizing energy picture could have a positive ripple effect, while concerns about a longer-term disruption could have the opposite.”

As US-Israeli strikes on Iran reverberated across the Middle East, President Donald Trump insisted there was no fixed timeline, while Defense Secretary Pete Hegseth rejected the idea of an “endless” war with Iran.

Secretary of State Marco Rubio said the US military would step up its attacks against Iran and “the hardest hits are yet to come from the US military.” The next phase will be even more punishing on Iran than it is right now, he added.

What Bloomberg strategists say…

Australian, Japanese and Korean bonds are all in retreat as Tuesday’s session gets going. The overnight signals from Treasuries were negative, but this is shaping up to be an even worse day for fixed-income markets across the region.

— Mark Cranfield, MLIV. For full analysis, click here.

As investors pared risk, haven assets drew fresh demand. Gold rose 0.6% to about $5,350 an ounce and silver climbed 0.4% to trade close to $90 an ounce. The Bloomberg Dollar Spot Index held its gains from the prior session, when it advanced 0.7%.

In other corners of the market, Australia’s 10-year yield jumped early Tuesday, as Reserve Bank Governor Michele Bullock said the central bank was “very alert” to the potential implications for inflation expectations from the Middle East conflict and is “well positioned” for a policy response if required.

Japan’s five-year bond yields also rose more than five basis points to 1.585%.

Meanwhile, Goldman Sachs Group Inc.’s trading desk warned that US equities may need to pull back further before they can mount a durable advance.

A broadly supportive macro backdrop has done little to help stocks absorb geopolitical tensions and sharp swings in commodity prices, creating what the bank’s traders called a “painful” near-term path.

While the spike in oil prices has rattled investors, historical data shows that the damage may be limited. In 22 instances since 2000 when West Texas Intermediate crude jumped 10% or more in a single session, S&P 500 returns beyond the immediate selloff were often positive, the Goldman traders noted.

The situation in the Middle East can be a catalyst for an “overdue trading correction in markets,” but from a strategic standpoint that’s an opportunity to engage as underlying fundamentals in Asia are still very constructive, Goldman Sachs Chief APAC regional equity strategist Timothy Moe said in a Bloomberg TV interview.

“We think there is a lot to like in the region,” Moe said. “Given the facts that we have at hand, I don’t think that there is an argument to deviate from the positive strategic view on Asian equities that we like.”

Corporate Highlights:

Blackstone Inc. is allowing investors to redeem a record 7.9% of shares from its flagship private credit fund, the latest sign of unease in an industry that’s faced a wave of withdrawals. US officials are considering caps on the number of AI accelerators Nvidia Corp. can export to any one Chinese company, which would further constrain the chipmaker’s reentry into a crucial market. Fitch Ratings downgraded Paramount Skydance Corp.’s corporate and long-term borrower ratings to junk following the media company’s agreement to buy larger rival Warner Bros. Discovery Inc Anthropic PBC’s artificial intelligence chatbot Claude and related consumer-facing applications went down on Monday, with the startup saying it has been grappling with “unprecedented demand” for its services over the past week. Nvidia agreed to invest $4 billion in two companies that develop data center optics that are essential for artificial intelligence. Apple Inc. unveiled the iPhone 17e, the latest version of its lower-end smartphone, and a faster version of the iPad Air. BlackRock Inc.’s Global Infrastructure Partners LP and EQT AB agreed to buy AES Corp. for about $10.7 billion in cash as the market heats up for power plant developers that can provide electricity for AI data centers. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.4% as of 10:49 a.m. Tokyo time Japan’s Topix fell 1.5% Australia’s S&P/ASX 200 fell 1.2% Hong Kong’s Hang Seng was little changed The Shanghai Composite fell 0.3% Euro Stoxx 50 futures fell 0.3% Currencies

The Bloomberg Dollar Spot Index was little changed The euro rose 0.1% to $1.1700 The Japanese yen was little changed at 157.41 per dollar The offshore yuan rose 0.3% to 6.8794 per dollar Cryptocurrencies

Bitcoin fell 0.7% to $68,970.68 Ether fell 0.7% to $2,030.19 Bonds

The yield on 10-year Treasuries advanced one basis point to 4.05% Japan’s 10-year yield advanced six basis points to 2.120% Australia’s 10-year yield advanced 11 basis points to 4.75% Commodities

West Texas Intermediate crude rose 0.9% to $71.85 a barrel Spot gold rose 0.5% to $5,351.10 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Abhishek Vishnoi.

©2026 Bloomberg L.P.