U.S. stocks fell and Treasury yields hit multiyear highs after Yemeni rebels attacked Saudi Arabian energy facilities, pushing oil prices to their highest levels of the summer.
The Dow Jones Industrial Average fell 628.18 points, or 1.18%, to 52786.07. The S&P 500 lost 45.08 points, or 0.58%, to 7673.52 and the tech-heavy Nasdaq Composite slipped 85.58 points, or 0.32%, to 26421.41.
Oil futures rose $1.55, or 1.7%, to $93.03 a barrel, the highest settlement in New York since June 4. Brent futures, the globally traded contract, tested the psychologically significant $100-per-barrel level. Houthi rebel attacks in the Saudi cities of Jazan, Najran, Abha and Khamis Mushait had hit "civilian and economic facilities," according to a Saudi spokesman. In another sign of escalation in the Middle East war, more U.S. Navy ships were attacked on Monday, The Wall Street Journal reported.
The yield on the policy-sensitive two-year Treasury rose 0.017 percentage point to 4.396%, the highest close since January 2025. The yield on the 10-year Treasury rose 0.022 percentage point to 4.805%, an almost three-year high. The yield on the 30-year bond rose 0.018 percentage point to 5.264%, closing within 5 basis points of 19-year highs.
Treasury yields are hovering at 2026 highs ahead of critical inflation data later this week.
"The question is how much of the inflation is temporary and related to oil prices being artificially elevated by what's going on in Iran and how much is tied to structural strength in the general economy," said Eric Marshall, president of Dallas-based mutual-fund firm Hodges Capital.
The U.S. dollar fell against rivals as traders hedged their bets on inflation trends ahead of the data, due on Thursday and Friday.
Gold futures, which are particularly sensitive to shifting rate expectations, fell $35.90, or 0.8%, to $4393.90 a troy ounce. Copper futures rose 2.2% to $6.7390 a pound, a record high. Buyers are stockpiling copper, in part, because of trade disruptions and supply outages. Copper's use in electric wires and infrastructure have also made it a popular proxy for betting on the AI boom.
Oil refiners, which benefit from a growing "crack spread" between the price of crude oil inputs and the price of their refined output, are trading at all-time highs. The VanEck Refiners exchange-traded fund, a basket of refinery stocks, rose 1.9% to $64.79 and is up by 71% for the year to date.
Energy inflation is also driving up interest-rate expectations and mortgage rates. U.S. home sales fell 0.6% in August from a year earlier, according to a tally from online real-estate firm Zillow.
Deal activity offset the inflation concerns, buoying the tech and industrial sectors.
French AI firm Mistral AI completed a new funding round led by South Korean chip maker Samsung Electronics that lifted its valuation above $24 billion, providing fuel to invest in model development and grow its customer base.
Qualcomm shares rose after the chip designer struck a deal worth as much as $60 billion to help Amazon develop specialized semiconductors for its AI infrastructure.
GE Aerospace agreed to buy metal-castings producer Consolidated Precision Products for $11.75 billion, placing a large bet on the advanced materials needed to keep its engines cool.
A trade war between the U.S. and Canada heated up. Canadian Prime Minister Mark Carney said retaliatory tariffs on about $20 billion of U.S. goods that kicked in on Tuesday were necessary to protect domestic sectors and workers.
Shares of Canadian jet maker Bombardier fell after President Donald Trump threatened to ban the manufacturer unless it made new commitments to build in the U.S., opening a new front in his trade war with Ottawa. Carney said Canada would backstop companies and regions targeted in the conflict.
Shares of quantum-computing companies rose after the U.S. acquired minority equity stakes in D-Wave Quantum, Rigetti Computing, and Quantinuum with a combined $300 million CHIPS Act deal aimed at accelerating research into the new style of computer.
The health-care sector was weak after earnings and R&D disappointments. American depositary receipts of Swiss drug giant Novartis fell 14% to $137.70 after an experimental neuromuscular treatment failed to significantly improve patient outcomes in a late-stage clinical trial. Medical device maker Boston Scientific fell 5.9% to $44.98 after it warned it would likely not meet prior growth projections due to a cyberattack.
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