Stocks fell Tuesday while rising oil prices pushed bond yields higher, a bumpy start to the month as investors fear renewed fighting in Iran could inflate prices and convince the Fed to hike interest rates.
The Dow Jones Industrial Average plunged 419 points, or 0.8%, while the S&P 500 and Nasdaq slumped 0.7% and 1%, respectively.
Oil prices rose after President Trump announced the US had unleashed a fresh wave of strikes on Iran, marking the second such uptick in two days.
Brent crude oil futures jumped 5% to $95 a barrel and West Texas Intermediate rose 5.3% to $90.33. National average gasoline prices remained above $4 a gallon.
The US 10-year Treasury yield soared to 4.796%, the highest level since January 2025. It has risen roughly 40 basis points since the end of June, causing concern among market watchers.
The US 30-year Treasury yield reached 5.286%, near the 19-year highs it reached last month.
The pressure isn’t confined to US debt. Government borrowing costs have climbed sharply across several major economies, including Japan, Germany, Britain and France, as investors reassess inflation, fiscal risks and the outlook for interest rates.
In Japan, the benchmark 10-year yield reached roughly 3% Tuesday – a level not seen since 1996. Britain’s 10-year was around 5.25%, while Germany’s stood around 3.37%.
Yields have been rising as investors fear a prolonged Middle East conflict could keep oil prices elevated, drive inflation higher and push the Federal Reserve to raise interest rates at its meeting on Sept. 16.
As bond prices fall, yields move higher, and higher yields can raise borrowing costs for consumers across mortgages, auto loans and credit cards.
Nic Puckrin, cross-asset analyst and founder of Coin Bureau, noted that August was an unusually strong month for the stock market.
“But now that we’re in September, the summer party for risk assets is over,” Puckrin said in a Tuesday note. “Prepare for a sell-off, especially in long-duration equities like tech and AI.”
“Despite bond yields across the globe hitting multi-year highs, the fixed income sell-off has further to go in September. With stubborn inflation and the chances of a September Fed hike on the rise again, the short end of the yield curve has few reasons to come down.”
On Sunday, the US renewed its airstrike campaign on Iran, marking the first major military escalation in a month.
It came just days after analysts at Goldman Sachs released a note saying that without any surprise attacks, oil supplies were recovering enough that prices could stay below $90 for the rest of the year.
Tehran retaliated with its own drone strikes against Jordan and the United Arab Emirates, reportedly targeting US forces stationed in those countries. Nearly all incoming missiles were intercepted with little to no impact on the ground, according to reports.
The Islamic Republic also attacked two supertankers carrying 4 million barrels of Saudi oil near Oman’s coast.
Ken Mahoney, chief executive of Mahoney Asset Management, noted that the Middle East conflict is a major contributor to the current market turmoil.
“Iran contributes a lot to the uncertainty. What is certain is the usual chain: higher oil prices, then higher bond yields, then lower stock prices,” he told The Post.
“September wasted no time selling off. Historically, it is the worst month of the year for stocks – and that pattern has held since 1990. Once again, large geopolitical forces are lining up for a perfect storm.”
The sell-off has implications well beyond the bond market. Higher Treasury yields can drive up financing costs throughout the economy while giving investors a safer alternative to stocks – potentially putting pressure on share prices.
“When investors can earn close to 5% on a 10-year Treasury, stocks have to compete with a much more attractive risk-free alternative,” Mark White, a wealth adviser at Mark White Wealth Advisors, told The Post.
“Higher yields also increase borrowing costs for businesses and consumers and can put pressure on stock valuations, particularly in areas of the market where valuations are already elevated,” he added.