Stock markets mostly declined on Thursday as US Treasury bond yields reached multi-year highs, influenced by ongoing tensions in the Middle East. European markets experienced losses, and Wall Street began the day in negative territory. However, a midday report from Reuters suggesting progress between Washington and Tehran on reopening the Strait of Hormuz temporarily boosted investor sentiment, although gains were short-lived. Art Hogan of B. Riley Wealth Management noted that markets require more substantial evidence of a deal to sustain positive momentum. By the end of the day, the S&P 500 and Nasdaq closed near flat, while the Dow posted modest losses.
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The US 10-year Treasury yield climbed to its highest level since 2007, with the 30-year yield reaching levels not seen since 2004, coinciding with rising oil prices. During Asian trading hours, Japan's 10-year yield also surged to a 30-year high. Kathleen Brooks, research director at XTB, remarked on the unusual volatility in sovereign bond markets, attributing it to increasing government debt, persistent economic growth, and inflation risks. She indicated that these factors negatively impact the bond market, leading to higher yields.
The rise in US yields is also linked to strong economic data and heightened expectations for tighter monetary policy, with futures indicating a 70 percent chance of an interest rate increase by the Federal Reserve in October. This increase is contributing to fixed-rate 30-year US mortgages exceeding 7.0 percent, posing challenges for potential homebuyers.
Investors were also watchful of a meeting between US President Donald Trump and Chinese leader Xi Jinping at the White House, focusing on trade, technology competition—especially regarding AI—and China's economic support for Tehran. In his opening remarks, Xi emphasized the need for AI development to remain "under human control," contrasting Trump's previous reassurances regarding AI risks. During their Oval Office discussions, Xi advised Trump to exercise "prudence" concerning Taiwan’s independence, an issue of contention between the nations.