Oil Prices Send Stocks Reeling on Wall Street

Stocks on Wall Street fell Tuesday due to pressure from higher oil prices and rising bond yields. The S&P 500 index dropped 0.7%, while the Dow Jones Industrial Average declined 0.8% and the Nasdaq composite slid 1%. Oil prices rose 4.6% after U.S. military strikes on Iran sent crude prices soaring.

The price of Brent crude, the international standard, settled at $94.65 per barrel, its highest level in over a month. U.S. oil climbed 5.2% to settle at $90.22 per barrel, also reaching a new high for the month. Higher oil prices have driven up costs for goods and services, contributing to stubbornly high inflation.

The ongoing sell-off in U.S. government bonds has also put pressure on stocks. The yield on the 10-year Treasury rose to 4.79%, while the yield on the 2-year Treasury climbed to 4.39%. Bond yields have an inverse relationship with prices, meaning rising yields signal falling bond prices and increasing borrowing costs.

Investors are demanding higher returns from bonds due to growing government debt, which surpassed $40 trillion two weeks ago. Higher borrowing costs will weigh down investments and make it more difficult for businesses to expand. The Federal Reserve is expected to raise interest rates before the end of the year to combat inflation, with investors predicting a 66% chance of a rate hike at its upcoming September meeting.