US Stock Market Declines Amid Crude Price Rebound and Rising Yields

US Stock Futures Resume Losing Streak Amid Rising Crude Oil Prices and Bond Yields

US stock futures declined on Thursday, May 21, as key headline indices pointed to a weak start amid a rebound in crude oil prices and rising bond yields. The Nasdaq 100 futures fell 0.6%, while S&P 500 futures declined 0.4%. In contrast, futures linked to the Dow Jones Industrial Average were marginally higher by 0.3%.

The rebound in crude oil prices, which triggered another spike in bond yields, was largely driven by Iran's Supreme Leader, who said the country must retain its uranium. This decision tempered optimism that the warring sides were moving closer to a deal to reopen the Strait of Hormuz. The Strait of Hormuz is a critical waterway that connects the Middle East to the global economy.

Iran has been reviewing the US's new draft proposal in response to its 14-point proposal and has yet to provide an official response. Despite the optimism that followed US President Donald Trump's statement that the US was in the "final stages" of negotiations with the Islamic Republic, the latest remarks from Iran's Supreme Leader have largely kept investor sentiment fragile.

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The back-and-forth over de-escalation hopes in the nearly three-month-long West Asia conflict has put pressure on Wall Street. However, strong support from technology stocks has helped the market scale record highs in recent months. That rally has recently come under pressure as fears of potentially higher interest rates pushed US bond yields to multi-year highs.

The 10-year US Treasury yield rose more than 3 basis points to 4.607%, setting the tone for borrowing costs around the world. The longer-dated 30-year Treasury bond yield, which is more sensitive to political risks, advanced over 2 basis points to 5.1334%. Today's rise in borrowing costs follows a sharp pullback during the previous session, which came after global bond yields touched multi-decade highs earlier this week on renewed inflation fears.

Investors remain divided on whether the Federal Reserve will raise rates by December or keep borrowing costs unchanged through year-end. Brokerage firm Vested Finance said the market is currently balancing two major forces simultaneously: AI-driven strong earnings, investment inflows, and optimism around future growth, and geopolitical tensions and elevated energy prices that pose risks to inflation and bond markets.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Crude oil prices rebounded as fears resurfaced that supply disruptions could persist for longer. Brent crude futures regained strength, rising $2.66 per barrel to the day's high of $107.66. WTI crude futures rebounded by $3 to $101 per barrel, partially recovering from the nearly 6% decline recorded over the previous two sessions.