Middle East Tensions Push US Stock Market Rally to the Brink

Rising oil prices and bond yields are casting a shadow over the US stock market rally due to escalating Middle East tensions.

Brent crude briefly climbed above $100 a barrel for the first time since May after renewed attacks disrupted shipping routes in the Strait of Hormuz and the Red Sea, stoking fears of tighter global supplies.

The surge in oil prices has also lifted Treasury yields as investors reassess the outlook for US monetary policy. The benchmark 10-year Treasury yield climbed to around 4.7%, its highest level since early 2025, reflecting expectations that the Federal Reserve may have to keep interest rates higher for longer if elevated energy prices feed into broader inflation.

Despite strong corporate earnings and significant AI-related spending by major technology companies, market participants are becoming increasingly cautious. Higher Treasury yields reduce the present value of future corporate earnings, making richly valued growth stocks more vulnerable.