US Stocks Fall 1% as Oil, Yields Spike on Iran Strikes

The S&P 500 fell 0.7% to 7,631.47 and the Nasdaq dropped 1% as a second round of US bombing on Iran sent crude to a five-week high and sovereign yields to multiyear peaks.

"The global bond selloff is putting worldwide central banks on notice," said Jake Dollarhide, chief executive officer at Longbow Asset Management. "Potentially, it's rate hikes across the board. That's not good for any company including tech."

The Dow Jones Industrial Average fell 419.02 points, or 0.79%, to 52,766.88, while the Nasdaq Composite dropped 271.11 points, or 1.03%, to 26,099.77. The VIX volatility index soared 9.6%. The 10-year Treasury yield rose 3.8 basis points to 4.795%, a 20-month high, while Japan's 10-year yield touched 3% for the first time since 1996 and the UK's 30-year yield hit its highest since 1998. West Texas Intermediate crude climbed $4.46, or 5.2%, to $90.22 a barrel, while Brent rose 4.6% to $94.65.

The selloff reflects a transmission chain in which energy inflation from the Strait of Hormuz conflict feeds into sovereign yields and borrowing costs. Traders now price a 66.2% chance the Federal Reserve raises rates at its Sept. 15-16 meeting, up from 39.6% a week ago, with US jobs and CPI data due before then set to be decisive.

Oil Spike Fans Inflation Bets

The US launched its second round of bombing on Iran after two oil tankers carrying Saudi crude were hit by projectiles in the Strait of Hormuz, the waterway Iran has effectively closed to shipping. Nymex diesel futures have more than doubled year-to-date, and the diesel crack spread — a measure of refining margins — hit a record near $107 a barrel, according to LSEG data. Euro-zone inflation rose back above 3% in August on higher energy costs, strengthening the case for a European Central Bank rate hike next month.

Fuel-intensive sectors bore the brunt of the equity decline. Cruise operators Carnival and Norwegian Cruise Line have each fallen more than 30% from their 2026 highs, while airlines dropped sharply. Home Depot fell 2.46% and Caterpillar lost 2.30% on the Dow, while energy producers bucked the trend — Chevron rose 2.38% and Helmerich & Payne gained 6.03%.

Yields Weigh on Rate-Sensitive Assets

The dollar index rose 0.27% to 99.68 as higher yields drew investors into the greenback, while rate-sensitive gold futures fell $83.10, or 1.9%, to $4,348 an ounce, trimming 2026 gains to 0.5%. The 30-year Treasury yield rose for a fifth consecutive session to 5.266%, within 5 basis points of 19-year highs.

"If sovereign-bond yields continue to rise, they will likely continue to weigh on equity markets," said Lorenzo Di Mattia, founder and chief investment officer at hedge-fund firm Sibilla Capital.

The AI infrastructure build-out continued despite the selloff. SoftBank-backed SB Energy registered for an initial public offering, geothermal company Fervo Energy struck a power deal with Alphabet's Google, and Anthropic signed a $35 billion cloud-computing agreement with Lambda. Nvidia shares fell 1.5% to $217.44 even as US chip indexes and Korea's Kospi trade in bear-market territory, reflecting a pullback by retail investors.

Apple rose 2.6% to $325.13 as Tim Cook concluded 15 years as chief executive, handing the reins to hardware executive John Ternus. Novartis gained 6% to $161.25 after its multiple-sclerosis candidate showed promise in two late-stage trials.

This article is for informational purposes only and does not constitute investment advice.