Wall Street extends losses as oil surges and yields rise
US equity markets closed lower yesterday, extending losses for a third consecutive session as escalating tensions in the Middle East pushed oil prices sharply higher. Brent crude climbed above $100 a barrel, while WTI rose to around $96, renewing concerns about inflation and the potential impact on consumer spending. The S&P 500 fell 0.5%, the Nasdaq Composite declined 0.6% and the Dow Jones Industrial Average lost 0.8%. The Russell 2000 underperformed, falling 1.3%. Market breadth was weak, with declining stocks outnumbering advancing stocks by more than four to one. Energy was the only S&P 500 sector to finish higher, gaining 1.1%, while technology was mixed. Meta rose more than 6% following the launch of its new AI assistant, while Alphabet fell 2.3%.
Bond markets also came under pressure, with the 10 year US Treasury yield rising to 4.84%, its highest level since late 2023. Treasury Secretary Scott Bessent announced that the Treasury would purchase up to $6 billion of 10 to 20 year government bonds in today’s buyback operation. The programme is intended to support liquidity and manage the maturity profile of US government debt, although investors questioned whether the size of the operation would be sufficient to address the broader factors keeping long term yields elevated. Higher yields, together with the renewed rise in oil prices, increased concerns over inflation and the Federal Reserve’s policy outlook. Investors are now focused on the latest US producer and consumer inflation data, due later this week, which could influence expectations for interest rates ahead of next week’s Federal Reserve meeting.
Asia and Europe track the oil surge ahead of the ECB decision
Asian equities fell broadly today, led by technology shares, as rising oil prices and higher US Treasury yields weighed on sentiment. Japan’s Nikkei fell 0.8%, South Korea’s KOSPI 1.1% and Hong Kong’s Hang Seng 1.6%. Australia also declined 1.6%, while mainland Chinese shares eased modestly. India’s Nifty futures edged higher.
US futures were broadly steady overnight, with S&P 500 and Nasdaq 100 futures both up 0.1%, while Dow futures gained 0.2%. Trading remained cautious ahead of key US inflation data. After hours, Apple rose 0.9% following the unveiling of its first foldable iPhone, partly reversing its 0.3% decline during yesterday’s session.
European equities closed sharply lower yesterday, with the Euro STOXX 50 falling 1.7% and STOXX Europe 600 down 1.5%, as Brent crude breached $100. Banks including Santander, ING, Deutsche Bank and Allianz fell around 2%, while industrials such as Schneider Electric, Siemens, Rheinmetall and Safran declined more than 3% ahead of today’s ECB meeting.
The US dollar held broadly steady, with the dollar index around 98.8 as investors awaited key US inflation data. Against the euro, the dollar was trading at around 1.1638 per euro, reflecting continued euro strength. Markets remain focused on inflation, oil prices and expectations for a possible 25 basis point Fed rate hike next week.
Oil and geopolitics dominate as the Iran conflict escalates
Oil prices remained elevated today as renewed US-Iran military strikes heightened concerns over supply disruptions. Brent crude held around $101 a barrel, while WTI traded near $96. Attacks on shipping around the Strait of Hormuz and Saudi energy infrastructure added to supply fears, while uncertainty over the conflict’s duration kept markets on edge.
US President Donald Trump’s advisers have privately warned that the Iran war could continue through the remainder of his term, potentially until 2029, despite public claims that it could end soon. The conflict has already lasted well beyond the initially expected timeframe, while rising oil prices and living costs are increasing political pressure ahead of November’s midterm elections.
Trump pledged a $5,000 dividend for every American adult if Republicans retain control of both chambers of Congress after the midterm elections. The proposal lacks details on funding, raising concerns given the US fiscal deficit, while higher living costs and fuel prices could make the pledge politically significant amid growing dissatisfaction over the Iran war.
Equities on the move
The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:
Apple unveiled its first foldable iPhone, the $1,999 iPhone Duo, featuring a 7.6 inch inner display, A20 Pro chip and up to 2TB of storage. It also launched the iPhone 18 Pro and Pro Max, further shifting its lineup towards premium devices. Apple shares initially fell during the event before gaining over 0.9% after hours.
Inditex shares fell after second-quarter profit missed expectations, despite stronger sales and 9% constant-currency growth in early August-September. Higher costs, partly due to Middle East supply-chain disruptions, weighed on earnings. However, management maintained full-year guidance, supported by strong Autumn/Winter demand.
OpenAI is deepening cooperation with Samsung on next-generation AI chips and enterprise AI services, as demand for advanced memory and computing capacity grows. Samsung and SK Hynix are also expected to supply memory for OpenAI’s Stargate project, highlighting South Korea’s increasing strategic importance to OpenAI’s semiconductor and AI infrastructure ambitions.
Amazon is raising £4bn through its first sterling bond sale, attracting over £12bn in demand, as hyperscalers diversify funding sources to finance surging AI investment. Hyperscaler debt issuance has exceeded $200bn this year, more than doubling 2025 levels, although growing borrowing is beginning to test investor demand.
Barclays raised its 2026 S&P 500 target to 7,950, citing strong technology-led earnings, while RBC retains a bullish 12-month outlook and 8,150 target. However, RBC warns of a potential 5-10% near-term pullback amid seasonal, political, geopolitical and rate concerns. Barclays remains positive on TMT and Industrials but negative on Consumer stocks.
HSBC downgraded LVMH and Burberry to Hold, citing limited visibility and tougher second-half comparisons. It cut price targets for both, despite improving second-quarter luxury sales. HSBC expects softer China sentiment and slower momentum, while favouring hard-luxury names such as Richemont, supported by resilient jewellery demand and stronger execution.
Upcoming data and events
Today’s key events include the ECB rate decision and press conference, US PPI inflation and jobless claims, existing home sales, Treasury and oil-inventory data. In earnings, Oracle headlines with its focus on AI and cloud demand, alongside Adobe and Robinhood.
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