US Stocks Decline, Oil Prices Rise Amid Fading Hopes for Middle East Peace
U.S. Inflation and Oil Prices Drive Global Markets Lower
On Tuesday, Wall Street's main equity indexes experienced a decline, with the U.S. dollar rising as a result of U.S. inflation climbing and oil prices increasing for a third consecutive day. The main catalyst for this shift was the fading hopes for a Middle East peace deal to get ships moving through the Strait of Hormuz.
U.S. consumer prices (CPI) rose sharply in April for a second consecutive month, resulting in the largest annual increase in inflation in nearly three years. This bolstered expectations that the Federal Reserve would keep interest rates unchanged for a while. The U.S. war on Iran has driven oil prices higher, resulting in more expensive gasoline, diesel, and jet fuel, and economists expect to see second-round effects in the months ahead.
The data followed U.S. President Donald Trump's announcement on Monday that a month-old ceasefire with Iran was "on life support" after Tehran's response to a U.S. plan to end the war made clear the sides were far apart. As a result, U.S. crude settled up 4.19% at $102.18 a barrel, while Brent settled at $107.77 per barrel, up 3.42% on the day.
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| Index | Change | Percentage |
|---|---|---|
| MSCI's gauge of stocks across the globe | -4.97 points | -0.45% |
| Pan-European STOXX 600 index | -1.01% | |
| Dow Jones Industrial Average | 56.09 points | 0.11% |
| S&P 500 | -11.88 points | -0.16% |
| Nasdaq Composite | -185.92 points | -0.71% |
| PHLX semiconductor index | -3% |
On Wall Street, the Dow Jones Industrial Average rose 56.09 points, or 0.11%, to 49,760.56, the S&P 500 fell 11.88 points, or 0.16%, to 7,400.96, and the Nasdaq Composite fell 185.92 points, or 0.71%, to 26,088.20. Manulife's Emily Roland pointed to the decline in semiconductor stocks as affecting sentiment and noted a pullback in technology shares in South Korea, which have been on an absolute tear in recent weeks.
In the bond market, U.S. Treasury yields rose on concerns about continued energy supply disruptions in the Middle East and after data showing rising U.S. consumer prices. The yield on benchmark U.S. 10-year notes rose 4.9 basis points to 4.461%, from 4.412% late on Monday, while the 30-year bond yield rose 3.8 basis points to 5.0253%.
| Yield | Change | Previous |
|---|---|---|
| 10-year U.S. Treasury notes | 4.9 basis points | 4.412% |
| 30-year U.S. Treasury notes | 3.8 basis points | 5.0253% |
| 2-year U.S. Treasury notes | 4.2 basis points | 3.989% |
| British 10-year gilt yield | 0.4 basis points | 5.107% |
| British 2-year gilt yield | -0.1 basis points | 4.551% |
Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
Sterling weakened 0.54% to $1.3533, making it one of the weakest-performing major currencies on the day. The U.S. dollar advanced for a second consecutive session after the economic data and amid uncertainty over the durability of the U.S.-Iran ceasefire. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.35% to 98.31, with the euro down 0.38% at $1.1737.
Gold prices were under pressure as fading hopes for a peace deal added to concerns about inflation and the prospect of higher global interest rates. Spot gold fell 0.43% to $4,713.93 an ounce, while U.S. gold futures fell 0.4% to $4,700.00 an ounce.
Investor Takeaway
Investors should be cautious of potential market volatility due to rising oil prices and fading hopes for Middle East peace.
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