Stocks Pare Losses as Surge in Bond Yields Ease: Markets Wrap
(Bloomberg) — A morning selloff in stocks was trimmed and a surge in Treasury yields eased as the Iran war continued to spur wild moves across asset classes. Speculation the US will take military action to secure shipping lanes pared what had been a 9% surge in oil.
Following an earlier plunge in the S&P 500 that reached 2.5%, the index was down by less than 1%. That was a day after it managed to erase its slide as investors try to price the impacts of the conflict. As soaring energy prices cast a pall over the ability of central banks to keep inflation in check, traders are betting on fewer chances of two Federal Reserve rate cuts in 2026.
“What the market is reacting to today is that this is going to be more prolonged than anticipated, but I don’t think that’s true,” said Nancy Tengler at Laffer Tengler Investments. “You do have to let these things settle and it could take a couple of weeks.”
The conflict in the Middle East reverberated across the region, with Israel bombarding Tehran with a fresh wave of strikes. The Islamic Republic fired missiles at Qatar, Bahrain and Oman, with Doha saying targets weren’t limited to military interests. Qatar and Iraq halted production at major energy sites.
The Strait of Hormuz — a vital shipping lane for tankers — remains all but shut. Any suggestion that flows through this chokepoint could be restricted is enough to unsettle commodity desks, according to Fawad Razaqzada at Forex.com.
As the war in Iran disrupts shipments, fuel costs have jumped. Soaring prices for diesel — used in freight, power and heating — will add to the cost of transportation, a key component of inflation. Gasoline prices have also surged, intensifying those risks.
The Dow Jones Industrial Average lost over 1,200 points before paring its slide. The yield on 10-year Treasuries advanced two basis points to 4.06%. The dollar edged up.
A prolonged conflict pushing oil to $90-$100 for a sustained period would be a significant economic headwind, noted Jennifer McKeown at Capital Economics. The adverse effects should be limited by central banks looking through the shock and avoiding rate hikes, but cuts would probably be delayed, she added.
Barring a prolonged disruption of oil supplies, the conflict is unlikely to end the cyclical stock bull market by itself, according to Ed Clissold and Thanh Nguyen at Ned Davis Research, which has tracked crisis events for decades.
The market has tended to decline during the event itself, by an average of 7% and a median of 3%, they noted. Once the crisis has passed, the market has recovered within a few months, on average. The exceptions have been when a crisis damages the economy.
Generally speaking, military actions cause a short-term disruption in markets, but as long as the economic damage is limited, they fully recover once there is more clarity in the scope of the intervention, according to Chris Zaccarelli at Northlight Asset Management.
“It is too soon to tell how events will unfold this month, but we are looking for opportunities to present themselves if traders overreact and throw the baby out with the bathwater,” he said.
Corporate Highlights:
Target Corp. forecast better-than-expected profit for the full year. Best Buy Co. reported profit for the holiday-shopping season that beat estimates. Apple Inc. updated the MacBook Air and MacBook Pro, adding faster processors and raising prices. What Bloomberg Strategists say…
“The floor for the SPX is expected to be 6,600, where positioning lightens, but dealer hedging flows and increasingly negative gamma will make the area below 6,800 much more choppy.” —Michael Ball, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.8% as of 2:16 p.m. New York time The Nasdaq 100 fell 1% The Dow Jones Industrial Average fell 0.8% The MSCI World Index fell 1.5% Currencies
The Bloomberg Dollar Spot Index rose 0.6% The euro fell 0.7% to $1.1607 The British pound fell 0.4% to $1.3347 The Japanese yen fell 0.2% to 157.74 per dollar Cryptocurrencies
Bitcoin fell 1.2% to $68,600.26 Ether fell 2.9% to $1,985.21 Bonds
The yield on 10-year Treasuries advanced two basis points to 4.06% Germany’s 10-year yield advanced four basis points to 2.75% Britain’s 10-year yield advanced 10 basis points to 4.47% Commodities
West Texas Intermediate crude rose 4.7% to $74.60 a barrel Spot gold fell 3.8% to $5,118.81 an ounce –With assistance from Vildana Hajric and Lu Wang.
©2026 Bloomberg L.P.
