Global stocks slide as oil tops $105 amid US-Iran war

Global equity markets sold off sharply on Thursday as surging crude oil prices reignited inflation fears and pushed bond yields to their highest levels in nearly three years, rattling investors from Sydney to New York.

The Dow Jones Industrial Average fell 213.74 points, or 0.41%, to 52,166.92, while the S&P 500 declined 41.29 points, or 0.55%, to 7,594.12. The Nasdaq Composite dropped 228.57 points, or 0.88%, to 26,022.90, with chip stocks Intel ↘ 3.77% and Micron Technology ↘ 7.00% falling around 3% and 2%, respectively.ndtvprofit

Oil Surge Drives the Selloff

Brent crude surged above $105 a barrel after further attacks on oil tankers in the Strait of Hormuz, while U.S. West Texas Intermediate futures jumped 4.4% to $100.27. The U.S.-Iran conflict, now in its seventh month, has kept a persistent risk premium on energy markets.ndtvprofit

"Oil is smashing the Australian share market," said Global X ETFs investment strategist Justin Lin. "Investors are being forced to confront the prospect that inflation could remain higher for longer".dailymail

In Australia, the S&P/ASX 200 fell 1.8% in its worst session in six months, wiping tens of billions of dollars off market value. Markets there now price in a 79% chance of a Reserve Bank of Australia rate hike this month, up from 64% earlier in the week.dailymail

Yields Climb, Rate Hike Bets Firm

The yield on the benchmark 10-year U.S. Treasury note climbed above 4.9%, its highest since November 2023, after a Treasury Department effort to buy up to $6 billion in longer-dated bonds failed to contain the rise. "A sustained drop in long-end yields can only be achieved by genuine shifts in macroeconomic policy," said Kyle Rodda, senior financial market analyst at Capital.com.kelo+1

The U.S. Producer Price Index rose a seasonally adjusted 0.4% in August, in line with the Dow Jones consensus estimate, but the 5.4% annual increase remained well above the Federal Reserve's 2% target. Traders priced in a 62.2% chance of a Fed rate hike at the September 16 meeting, according to the CME FedWatch tool.ndtvprofit+1

What Comes Next

Attention now turns to Friday's Consumer Price Index report and next week's Fed policy decision. Fed Chair Kevin Warsh, speaking at Jackson Hole last month, left little doubt about the central bank's priorities: "Inflation is running above our 2 percent target. So the Fed's predominant focus right now should be on prices".ndtvprofit