Markets Plunge as US-Iran Conflict Intensifies Amid Inflation Fears

The global bond sell-off has intensified as investors await the release of the US government's monthly employment report for August, which will provide key insights into the jobs market. The S&P 500 index rose 0.1%, while the Dow Jones Industrial Average gained 265 points, or 0.5%. Technology stocks, such as Microsoft and Broadcom, were among the biggest drag on the market.

The intensification of the US-Iran conflict has led to higher energy costs, which have worsened inflation that was already high amid a volatile tariff war with much of the world. The yield on the 10-year Treasury held steady at 4.79%, while the yield on the 2-year Treasury remained at 4.39%. Investors are betting on a 66% chance that the Federal Reserve will raise interest rates at its upcoming meeting in September.

The Fed's position is becoming increasingly complicated as it tries to balance supporting employment and taming inflation, which remains well above 3%. Raising interest rates would help cool inflation by making borrowing costs higher, but could also hurt the employment market. The jobs market has been showing signs of weakening, with private-sector employment slipping in August according to ADP's monthly survey.