Global stocks head for biggest weekly drop since mid-July

Global stocks are heading for their steepest weekly decline since mid-July as surging oil prices and persistent bond market stress reignite inflation concerns six months into the Iran conflict. Brent crude broke above $94 a barrel this week while U.S. 10-year Treasury yields pushed toward 4.70%, squeezing equity valuations and rattling investors worldwide.actionforex+1

Bond Stress and Oil Combine to Pressure Equities

Europe's Stoxx 600 closed 0.12% lower on Thursday, extending its losing streak to a seventh consecutive session — the longest since September 2023. The S&P 500 fell 0.87%, the Nasdaq Composite dropped 1.00%, and the Dow Jones Industrial Average retreated 1.32%. In Asia, Japan's Nikkei 225 slipped 0.3% on Friday, bringing weekly losses to nearly 4%.dmarketforces+2

The U.S. Treasury's surprise intervention on Wednesday — expanding long-dated bond buybacks — provided barely a day of relief. By Thursday, the 30-year yield had climbed back toward 5.25% and the 10-year toward 4.70%, with German, UK and Canadian yields rising in tandem. Christian Hantel, head of global corporate bonds at Vontobel, told Reuters the initial buyback move "was quite remarkable because it came totally as a surprise, but the big question is, is this meaningful enough to have a long-lasting impact?"freemalaysiatoday+1

Energy-Driven Inflation Fears Intensify

The prolonged closure of the Strait of Hormuz, now six months old, has sent refined product prices sharply higher. European diesel has jumped more than 70% since the outbreak of war in February, while U.S. gasoline is up 60%, according to Reuters. President Trump's threat of "TREMENDOUS Economic Consequences" against countries helping Iran evade sanctions, combined with the UAE's suspension of economic ties with Tehran, further dimmed prospects for a diplomatic resolution.reuters+2

Ipek Ozkardeskaya, senior analyst at Swissquote, said "price pressures could move higher in the coming readings as the July retreat in energy prices proved temporary. With no easy resolution in the Middle East, inflation risks remain tilted to the upside."businesstimes

What Comes Next

Central bank chiefs gathering at Jackson Hole next week face a fraught backdrop. Fed Chairman Kevin Warsh must decide whether to address near-term rate policy or stick to his preference for discussing structural reforms. Markets will also watch Nvidia's ↘ 0.98% earnings on Wednesday and the U.S. core PCE inflation reading — expected to print above the Fed's 2% target for the 65th consecutive month.reuters

The dollar, meanwhile, has fallen to a three-month low against major currencies, declining nearly 1% this week even as Treasury yields rose — a disconnect analysts attribute to the global nature of the yield surge. Bitcoin ↘ 0.57% scaled a two-month high, up nearly 20% for the week, as some investors sought alternatives to dollar-denominated assets.freemalaysiatoday