Global risk assets came under pressure on Monday after U.S.-Iran peace talks collapsed, triggering a fresh surge in oil prices and a renewed inflation scare that pushed U.S. Treasury yields to multi-decade highs.
Stock futures fell broadly: Nasdaq 100 futures dropped about 1%, S&P 500 futures fell roughly 0.5%, and Dow futures slipped 305 points. Brent crude climbed above $107 a barrel, while West Texas Intermediate rose above $94. The 10-year Treasury yield held around 5.2%, near its highest level since 2007, and the 30-year yield traded near 5.51%.
Investors increasingly priced in another Federal Reserve move. Markets showed a roughly 66% probability of an October rate increase following September’s quarter-point hike. Upcoming August PCE inflation data and September payrolls could determine the central bank’s next step. Core PCE inflation was running at 3.3% year-over-year in July, still well above the Fed’s 2% target.
Higher long-term yields hit technology and AI-related shares hardest. Intel fell about 3.4%, Sandisk dropped around 3.3%, and AMD, Corning, Dell, Marvell, and Micron also slipped. Meta retreated about 1.4% in premarket trading. In contrast, energy stocks gained: Chevron added about 1.3%, ExxonMobil rose 1.6%, and other oil-linked names advanced.
A partial counterweight came from U.S.-China trade relief. Washington and Beijing agreed tariff reductions covering $60 billion of bilateral trade and extended their trade truce through January 10, though this was not enough to offset the oil-and-rates shock.
Boeing slipped 1.1% after a report of a software glitch tied to an automated landing feature. NIO rose about 2.2% after Geely agreed to acquire a 30% stake in its battery-swapping business in a deal valuing the unit at about $2.4 billion.
MUFG senior currency analyst Lloyd Chan said the simultaneous rise in oil and long-term bond yields suggests investors are attaching a greater inflation risk to the global outlook. The risk-off tone is likely to weigh on crypto markets, as digital assets remain sensitive to liquidity expectations and higher discount rates.
