Treasuries Sink as Oil Jump Stokes Inflation Fears: Markets Wrap
(Bloomberg) — Wall Street’s worries about an inflation resurgence sent bonds slumping as oil surged amid an escalating war in the Middle East, with traders trimming bets on rate cuts. The dollar rose. Stocks bounced from session lows.
Also weighing on Treasuries were figures showing manufacturing expanded, with input prices soaring. Ten-year yields headed toward their biggest advance since April. The S&P 500 was little changed after a slide that earlier topped 1% as energy and defense firms gained while the software group rallied. Airlines sank.
As tanker traffic all but halted through the Strait of Hormuz and a big refinery in Saudi Arabia stopped, West Texas Intermediate crude soared 6.5%. Diesel futures jumped more than fifth at one point. In Europe, liquefied natural gas surged after Qatar halted output.
Uncertainty about oil prices may play a big role in determining broader market sentiment, according to Chris Larkin at E*Trade from Morgan Stanley.
“There are more questions than answers right now, but a stabilizing energy picture could have a positive ripple effect, while concerns about a longer-term disruption could have the opposite,” he said.
US-Israeli strikes on Iran quickly reverberated across the Middle East. President Donald Trump called on the nation’s leaders to capitulate, while the Islamic Republic’s security chief ruled out negotiations. Meantime, Defense Secretary Pete Hegseth rejected the idea of an “endless” war.
The yield on 10-year Treasuries climbed 11 basis points to 4.05%. Traders are now fully pricing in a first Federal Reserve rate cut for September, with bets on a third reduction in 2026 almost evaporating. The dollar rose 0.8%. Bitcoin approached $70,000.
Morgan Stanley strategists see the eruption of conflict in the Middle East as unlikely to derail their bullish view on US stocks, barring a sharp and sustained surge in oil prices.
“Unless oil prices spike in a historically significant manner and remain elevated, recent events are unlikely to change our bullish view on US equities over the next 6-12 months,” the team led by Mike Wilson wrote in a note.
The current geopolitical escalation should ultimately be a buying opportunity in stock markets as fundamentals remain positive, according to JPMorgan Chase & Co. strategists led by Mislav Matejka.
Investors should be careful about paying too much attention to studies that suggest always buying stocks after geopolitical conflicts, according to RBC Capital Markets’s Lori Calvasina, who warn the evidence for rebounds doesn’t always reflect the risks around wider wars.
Corporate Highlights:
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 Corp. 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, kicking off a wave of new products. Paramount Skydance Corp. will combine the Paramount+ and HBO Max streaming services into a single platform, following the company’s $110 billion acquisition of Warner Bros. Discovery Inc. 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 energy-hungry AI data centers. Some of the main moves in markets:
Stocks
The S&P 500 was little changed as of 11:45 a.m. New York time The Nasdaq 100 was little changed The Dow Jones Industrial Average was little changed The Stoxx Europe 600 fell 1.6% The MSCI World Index fell 0.5% Currencies
The Bloomberg Dollar Spot Index rose 0.8% The euro fell 1.1% to $1.1687 The British pound fell 0.7% to $1.3383 The Japanese yen fell 0.9% to 157.38 per dollar Cryptocurrencies
Bitcoin rose 6.5% to $69,928.73 Ether rose 7.6% to $2,076.5 Bonds
The yield on 10-year Treasuries advanced 11 basis points to 4.05% Germany’s 10-year yield advanced seven basis points to 2.71% Britain’s 10-year yield advanced 14 basis points to 4.38% The yield on 2-year Treasuries advanced 11 basis points to 3.49% The yield on 30-year Treasuries advanced nine basis points to 4.70% Commodities
West Texas Intermediate crude rose 6.3% to $71.22 a barrel Spot gold rose 0.4% to $5,302.20 an ounce ©2026 Bloomberg L.P.
