US Equities Slip as Oil Surge and Treasury Yields Weigh on Sentiment
Geopolitical tensions in the Middle East drive WTI crude prices above 2% gains, pushing 10-year Treasury yields to 4.68% and pressuring major US indices on Monday.
US stock indices closed slightly lower on 10 August 2026, weighed down by rising crude oil prices and climbing Treasury yields that heightened inflation expectations. The S&P 500 Index fell 0.04%, the Dow Jones Industrial Average declined 0.14%, and the Nasdaq 100 dropped 0.15%. September E-mini S&P futures and Nasdaq futures also posted modest losses, reflecting the broader market pressure.
WTI crude oil prices rose more than 2%, driven by ongoing geopolitical tensions in the Middle East, particularly concerning the Strait of Hormuz. Iranian Foreign Minister Abbas Araghchi indicated that an agreement with Oman to establish a shipping route was "very close," though it required the US to lift its blockade, withdraw forces, and remove sanctions. Meanwhile, President Trump signalled a preference for economic pressure over military strikes, stating the US was only "semi-negotiating" with Iran.
The surge in energy costs pushed the 10-year Treasury note yield up by approximately 3 basis points to 4.68%. Supply pressures further weighed on bond prices as the Treasury prepares to auction $125 billion of T-notes and T-bonds this week, beginning with a $58 billion auction of 3-year notes. Markets are currently discounting a 47% chance of a 25 basis point rate hike at the next Federal Open Market Committee meeting in mid-September.
Despite the headwinds, energy and cybersecurity stocks gained ground, providing support to the broader market. APA Corp led energy gains with a rise of more than 5%, while major names including Occidental Petroleum, Marathon Petroleum, and ExxonMobil all climbed more than 3%. In the technology sector, CrowdStrike, Palo Alto Networks, and Fortinet rose more than 3%, offsetting declines in other areas.
Optimism surrounding artificial intelligence spending and strong second-quarter earnings reports also underpinned investor sentiment. Taiwan Semiconductor Manufacturing Co reported July sales rose 45% year-on-year, signalling sustained demand for AI hardware. JPMorgan Chase raised its year-end S&P 500 target to 8,000 from 7,800, citing faster-than-expected AI monetization and a robust earnings season.
Overseas markets performed better than their US counterparts, with European and Asian indices closing higher. The Euro Stoxx 50 rose 0.10%, while China's Shanghai Composite climbed to a 3.5-week high. Japan's Nikkei-225 rallied sharply by 2.08% to a two-week high. European government bond yields also moved higher, with the 10-year German bund and UK gilt yields rising 2.4 and 3.9 basis points respectively.
