Stocks in the US market slipped on Wednesday, and oil prices continued climbing as the US-Iran war rages on without an expected conclusion. Negotiations between the two countries remain far from a solution, and the major indices are being affected at the time of writing. The Dow Jones Industrial Average (^DJI) fell 0.8%, while the benchmark S&P 500 (^GSPC) slipped by about 0.5%.
Earlier this week, amid concerns that US-Iran negotiations were on ice, President Trump took to social media to reassure that they were continuing “at a rapid pace.” Now, however, Israel’s military campaign against Hezbollah in Lebanon has become a new hurdle to reaching a lasting deal to end the war and open the Strait of Hormuz. Hence, U.S. stocks are being hit hard as uncertainty persists.
In addition, the latest skirmish between the U.S and Iran pushed up oil prices. Brent crude futures ticked up to about $98 a barrel as markets gradually lost their optimism that a deal to end the war would materialize quickly. The Gulf kingdom of Kuwait came under a barrage of ballistic missiles and drones on Wednesday, as Iran launched its largest salvo of the nearly two-month ceasefire. Kuwait, a US ally, said its army was “confronting hostile missile and drone attacks” in a post on X on Tuesday. The U.S. and Iran had exchanged heavy fire the evening before, but U.S. Central Command said Tuesday night that the tenuous truce was “ongoing.”
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Furthermore, bond yields also rose on Wednesday, a sign that traders are worrying about inflation. The fear has been that higher oil prices can stoke higher prices across the US economy, which could raise rates and dent appetite for Treasurys. The 10-year yield ticked up 4 basis points to around 4.49%, just a hair under the key psychological threshold of 4.5%. The 30-year US Treasury yield traded around 4.99%, while the 20-year yield surpassed 5%.