BY COMFORT OGBONNA
Global financial markets came under pressure on Tuesday as investors weighed the latest developments in U.S.-Iran negotiations, rising inflation fears and surging Treasury yields that climbed to levels not seen since the global financial crisis.
A broad global stock index declined while long-term U.S. government bond yields jumped sharply, reflecting growing anxiety that persistent inflation and geopolitical tensions could keep borrowing costs elevated for longer than expected. Oil prices, however, eased slightly after signs emerged that diplomatic efforts between Washington and Tehran may still prevent a renewed military escalation.
President Donald Trump said the United States could still strike Iran again if necessary, revealing that he had been close to authorizing military action before deciding to delay it. According to Trump, he was roughly an hour away from ordering an attack before pausing the plan after receiving a fresh proposal from Tehran aimed at ending the conflict involving the United States and Israel.
The comments added another layer of uncertainty to already volatile markets. On Monday, Trump had indicated that he temporarily halted plans to resume hostilities after Iran signaled interest in negotiations.
Vice President JD Vance later sought to calm tensions, saying discussions between Washington and Tehran had made substantial progress and that neither side appeared eager to restart military operations.
Despite the easing of immediate war fears, investors remained worried about the broader economic consequences of the conflict, especially its impact on inflation and energy prices.
Oil prices ended the session lower after fluctuating throughout the day. Brent crude futures settled down 82 cents at $111.28 per barrel, while U.S. West Texas Intermediate crude for June delivery dropped 89 cents to close at $107.77 per barrel. Traders interpreted the softer oil prices as a sign that markets believe diplomacy could still prevent a deeper disruption to global energy supplies.
Even with oil retreating slightly, inflation concerns continued to dominate bond markets. Yields on long-term U.S. Treasury bonds surged higher as investors demanded greater returns to compensate for the risk of persistent inflation and tighter monetary policy.
The yield on the 30-year U.S. Treasury bond climbed to its highest level since 2007, reaching around 5.18%. Meanwhile, benchmark 10-year Treasury yields rose to their highest levels in more than a year.
Higher Treasury yields tend to pressure stock markets because they increase borrowing costs for businesses and consumers while also reducing the present value of future corporate earnings. This dynamic has become particularly important for high-growth technology companies whose valuations rely heavily on future profit expectations.
Peter Cardillo, chief market economist at Spartan Capital Securities, said investors are increasingly concerned about the continued rise in long-term borrowing costs.
“We’re seeing the long end of the market continues to rise,” Cardillo said. “That is the reason why we’re seeing stocks on the defensive.”
Wall Street closed sharply lower as investors reduced exposure to riskier assets ahead of several major corporate earnings reports expected later this week.
The DJIA fell 322.24 points, or 0.65%, to close at 49,363.88. The S&P 500 dropped 49.44 points, or 0.67%, ending at 7,353.61, while the NASDAQ Composite slid 220.02 points, or 0.84%, to finish at 25,870.71.
MSCI’s global stock index also weakened, falling 0.59% as markets across multiple regions reacted to concerns about inflation, interest rates and geopolitical uncertainty.
Investors are now turning their attention to upcoming earnings from Nvidia, whose results are expected to test whether enthusiasm surrounding artificial intelligence can continue supporting soaring technology valuations. Expectations for the chipmaker remain extremely high after its stock became one of the biggest drivers of recent market gains.
Retail giant Walmart is also scheduled to report earnings later this week, with investors watching closely for signs of how consumers are handling higher prices and economic uncertainty.
European markets, however, managed to recover modestly after heavy losses at the end of last week. The pan-European STOXX 600 index rose 0.19% as investors cautiously returned to equities following Friday’s sharp selloff triggered by bond market volatility.
European stocks continue to lag behind their U.S. counterparts, partly because Europe imports large amounts of energy and has fewer dominant technology firms benefiting from the artificial intelligence boom.
Currency markets also reflected growing concern about inflation and interest rates. The U.S. dollar strengthened against major currencies as rising Treasury yields boosted demand for dollar-denominated assets.
The dollar index, which measures the greenback against a basket of currencies, rose 0.34% to 99.33. The euro weakened 0.45% to $1.1602, while the dollar gained 0.14% against the Japanese yen to trade at 159.05 yen.
Investors are also adjusting to the possibility that the Federal Reserve may need to keep interest rates higher for longer — or even raise them further — if inflation accelerates because of sustained energy price pressures linked to the Iran conflict.
Attention has additionally turned toward new Federal Reserve Chair Kevin Warsh and how aggressively the central bank might respond if inflation continues to rise.
In Asia, fresh economic data showed Japan’s economy expanded at an annualized pace of 2.1% during the first quarter, strengthening expectations that the Bank of Japan could move toward another interest rate increase in June.
Traders are also awaiting details about Japan’s supplementary government budget, with some analysts warning that increased spending could further weaken the country’s already strained public finances and place additional pressure on the yen.
Gold prices slipped as the stronger U.S. dollar reduced demand for the precious metal. U.S. gold futures for June delivery settled 1% lower at $4,511.20 per ounce.
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