Trump Threatens to Bomb Oman, US Bond Yields Hit 19-Year High
Geopolitical tensions in the Middle East have once again shaken global financial markets. Brent crude oil prices surged to around US$91 per barrel earlier this week, after Iranian media reported the seizure of an oil tanker in the Strait of Hormuz, the strategic shipping lane that serves as the lifeblood of global energy trade.
The situation heated up further after US President Donald Trump threatened to bomb Oman if the country was deemed to be obstructing Washington’s efforts to reach a peace deal with Iran. In recent weeks, Iran has become increasingly aggressive by attacking several tankers attempting to pass through the strait.
This turmoil has also pressured the US bond market. The yield on 30-year Treasury bonds closed at 5.31%, the highest level in 19 years. Meanwhile, the 10-year Treasury yield also edged up to 4.725%, from 4.695% at the end of last week’s trading.
Beyond geopolitical factors, investors are also closely watching the weakening Chinese economy. China’s retail sales data for July grew by only 0.6% year-on-year, far below market expectations. This figure emerged shortly after US retail sales data last week also disappointed market participants, shifting attention to the quarterly earnings reports of retail giants such as Target and Walmart as indicators of American consumer health.
Amid the negative sentiment, shares of chipmakers and artificial intelligence (AI) companies actually posted gains. SpaceX was in the spotlight after its shares jumped 4.4% following the disclosure of several major institutional and individual investors in the company’s latest filing, including Nvidia, Harvard University, and Peter Thiel.
Although optimism in the AI sector provided some relief, it was not enough to prop up the main Wall Street indices. The Dow Jones Industrial Average closed down 0.5%, the Nasdaq fell 0.3%, and the S&P 500 slipped 0.5% in Monday’s trading.
Looking ahead, market participants will be watching Home Depot’s financial results scheduled for release on Tuesday, as well as US housing starts and industrial production data, which are also of interest to investors in gauging the direction of the Federal Reserve’s next policy move.