Stocks Slip as Mideast Flare-Up Lifts Oil, Yields: Markets Wrap
(Bloomberg) — Stocks fell while oil and bond yields climbed after fresh attacks in the Middle East fueled doubts over whether an end to the war is imminent.
S&P 500 futures slipped 0.1%, pointing to the benchmark’s first decline in more than a week. Nasdaq 100 contracts dropped 0.3%. Brent rose 2.1% to above $96 a barrel after the US carried out airstrikes on an Iranian military site. Bonds fell in most markets, with the Federal Reserve’s preferred top-line inflation gauge expected to climb closer to 4% in data due Thursday.
The latest flare-up between the US and Iran showed the fragility of their ceasefire, despite traders mostly viewing a deal between the sides as only a matter of time. The prospect of oil-driven inflation is also building, prompting central bankers to increasingly warn that interest rates may need to rise.
“The market is caught between two very different worlds,” said Aneeka Gupta, director of macro-economic research at Wisdomtree. “One where we get a deal, and you have a follow-through of a very powerful cyclical recovery, and another where the conflict process deepens the stagflation impact on the economy.”
Europe’s Stoxx 600 fell 0.5%, with technology stocks outperforming despite weakness in Nasdaq 100 futures. A gauge for Asian stocks snapped its longest winning streak since February. The dollar rose for a third straight day. Bitcoin fell to its lowest level in more than six weeks.
Less than a day after Federal Reserve Governor Lisa Cook warned that inflation was headed in the wrong direction, Minneapolis Fed President Neel Kashkari told CNBC that consumer prices were still “much too high.”
The Fed’s Philip Jefferson warned that inflationary risks remained tilted to the upside even as he expects the effects of tariffs and higher energy costs to wear off. South Korean policymakers signaled Thursday they were increasingly leaning toward higher borrowing costs in coming months.
Thursday’s data is expected to show that the US personal consumption expenditures price index jumped 3.8% in April from a year ago. That would put inflation a full percentage point higher than it was in February, marking the biggest two-month acceleration since 2021.
PCE Surprise
Holger Schmieding, chief economist at Berenberg Bank, said the fact that markets have given up on Fed rate cuts for the foreseeable future means it will take a major downside surprise in core PCE for bonds to move significantly.
“For the question if and by how much the Fed may raise rates later on, we need to watch whether the Iran shock filters through into non-energy prices,” Schmieding said.
The caution in markets and worries that equities have run too hard is misplaced, said Mathias Heim, chief investment officer at Belle Capital.
“If a peace deal takes another two weeks or two months, I don’t think markets care as much anymore unless oil meaningfully breaks higher,” Heim said. “The elephant in the room is the AI capex cycle, which drives profit growth and multiples. Structurally, equities remain the go-to asset class.”
Corporate News:
Snowflake Inc. shares jumped 35% in premarket trading after the software maker gave a stronger-than-expected annual outlook and signed a $6 billion multiyear agreement to use Amazon.com Inc.’s cloud services and chips. Salesforce Inc. gave a revenue outlook for the current period that fell just short of analysts’ estimates, unnerving investors already concerned about the possibility that artificial intelligence will disrupt the software business. Shares in drone-related firms are rallying after the Wall Street Journal reported the Trump administration is exploring funding deals with a group of drone companies. Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 0.5% as of 10:37 a.m. London time S&P 500 futures fell 0.1% Nasdaq 100 futures fell 0.3% Futures on the Dow Jones Industrial Average were little changed The MSCI Asia Pacific Index fell 0.8% The MSCI Emerging Markets Index fell 0.8% Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro was little changed at $1.1616 The Japanese yen was little changed at 159.41 per dollar The offshore yuan was little changed at 6.7805 per dollar The British pound fell 0.2% to $1.3402 Cryptocurrencies
Bitcoin fell 2.4% to $73,330.77 Ether fell 3.5% to $1,988.79 Bonds
The yield on 10-year Treasuries advanced one basis point to 4.49% Germany’s 10-year yield was little changed at 3.00% Britain’s 10-year yield was little changed at 4.85% Commodities
Brent crude rose 2.1% to $96.25 a barrel Spot gold fell 1.3% to $4,395.31 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael Msika.
©2026 Bloomberg L.P.
