By Dow Jones Newswires Staff
Yields on government bonds climbed across the globe as investors grew increasingly concerned about the inflationary impact of a prolonged U.S.-Iran conflict.
Brent crude oil held above $110 a barrel, with the U.S. and Iran no closer to a peace deal. President Trump told Iran on Sunday the "clock is ticking" and suggested renewed strikes if a deal isn't reached soon.
In response, U.S. Treasury yields rose to more than one-year highs, as rising oil prices fortified market expectations of a Federal Reserve interest-rate hike this year. Meanwhile, 10-year German bond yields hit a 15-year high.
U.S. stock futures fell, extending heavy selling Friday as investors look ahead to Nvidia earnings Wednesday. Fed watchers will also look to Wednesday's release of meeting minutes.
--Oil prices trimmed gains, though stalled efforts to end the Iran war kept the risk premium high. In early European trading, Brent crude was up 0.7% to $110.05 a barrel, while WTI rose 0.7% to $101.77 a barrel. The benchmarks reached $112 and $104 a barrel, respectively, earlier in the session after a drone strike set off a fire near a nuclear-power station in the U.A.E. over the weekend. "The oil market continues to reprice ongoing supply disruptions, with last week's Trump-Xi talks yielding no tangible progress in the Middle East," analysts at ING said. "If anything, re-escalation risks are increasing." Meanwhile, the U.S. granted a sanctions waiver that allowed countries to buy Russian seaborne oil to lapse despite tightening market conditions.
--In the U.S., futures for the S&P 500 were down 0.5% while futures for the Dow Jones Industrial Average fell 0.7%. The tech-heavy Nasdaq was 0.45% lower premarket.
--Asian equities were mostly lower on Monday. Japan's Nikkei Stock Average fell 1.0% and South Korea's Kospi was up 0.3%. Hong Kong and Chinese stocks fell after China's economy unexpectedly weakened in April. Momentum slowed across the board as consumption, investment and real estate all stumbled.
--Europe's blue-chip stock indexes fell in early trade. Luxury, construction and technology stocks faltered, with the Europe-wide Stoxx 600 dropping 0.8%. France's CAC 40 was 1% lower, extending a four-week run of losses. Luxuries weighed on the index, with sector bellwether LVMH dropping 2%. The sector also dragged on the Italian FTSE MIB, which fell 2%. The German DAX was 0.6% lower. Losses for London's FTSE 100 were less severe, with the index losing 0.2% as oil majors helped counter losses for housebuilders. The Dutch AEX was down 0.5% as semiconductor stocks falter with ASML--Europe's most valuable company--dropping 2.4%.
--U.S. Treasury yields rose in Asian trade, extending Friday's moves. "There has been a dramatic shift in the expectations for U.S. monetary policy as the market [is] now pricing in a hike in 2026," Danske's Kristoffer Kjaer Lomholt said in a note. In Asian trade, the two-year Treasury yield rose to 4.103%, the highest since February 2025; the 10-year yield hit 4.631%, the highest since January 2025, while the 30-year yield increased to 5.159%, a one-year high.
--Eurozone government bond yields rose, taking the 10-year German Bund yield to its highest since 2011. "Government bond yields are rising across the U.S., U.K., Europe and Japan as investors reassess inflation risks, higher energy prices, political uncertainty and growing fiscal pressure," eToro's Lale Akoner said in a note. "The move higher in yields suggests markets are increasingly accepting a 'higher-for-longer' interest rate environment," the global market strategist said. The 10-year German Bund yield rises to 3.187%, according to LSEG data. In the U.K., ten-year gilt yields hit 5.186%, their highest level since 2008 as political uncertainty added to inflation concerns.
--The dollar eased only slightly after reaching a near six-week high overnight. The market is pricing a 70% chance of a Fed rate rise by December and fully pricing a move by March 2027, LSEG data show. The DXY dollar index fell 0.1 % to 99.194 after rising as high as 99.409 overnight.
--Bitcoin fell to a 17-day low, down 1.7% to $76,561.
--Gold prices fell as inflation concerns weighed on demand for non-yielding assets. In early European trading, gold futures in New York slipped 0.3% to $4,549.10 a troy ounce and are down nearly 7% on the month. "The lack of progress toward a U.S.-Iran agreement and renewed threats from President Trump against Iran lifted oil prices further, increasing expectations that central banks may keep interest rates elevated or even raise them," said Soojin Kim from MUFG.
Write to Barcelona Editors at barcelonaeditors@dowjones.com
(END) Dow Jones Newswires
May 18, 2026 04:06 ET (08:06 GMT)
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