Middle East Tensions Send US Stock Market Rally into Uncertain Territory

The US stock market is facing renewed pressure as rising oil prices and bond yields threaten to derail its rally. Escalating conflict in the Middle East has pushed oil prices sharply higher, with Brent crude briefly climbing above $100 a barrel last week for the first time since May.

The surge in oil prices has lifted Treasury yields, with the benchmark 10-year yield reaching around 4.7%, its highest level since early 2025. This is prompting investors to question whether the resilience of the US stock market can withstand mounting geopolitical and inflationary pressures.

Despite strong corporate earnings and significant artificial intelligence-related spending by major technology companies, the recent rise in long-term yields has been accompanied by growing expectations that the Federal Reserve could maintain a restrictive policy stance for longer than previously anticipated. This has made richly valued growth stocks more vulnerable to higher borrowing costs and slower economic activity.