Stocks fall as US bond yields rise, oil eases after latest Iran war updates

NEW YORK/LONDON - A global stock index fell with 30-year U.S. Treasury yields rising to their highest levels since 2007 on Tuesday, and oil prices eased as investors digested the latest headlines on U.S. talks with Iran to end the war.

President Donald Trump said on Tuesday that the United States may need to strike Iran again and that he had been an hour away from ordering an attack before postponing it. Trump on Monday said he had paused a planned resumption of hostilities following a new proposal by Tehran to end the U.S.-Israeli war.

Vice President JD Vance said the United States and Iran have made a lot of progress in their talks and neither side wants to see a resumption of the military campaign.

Oil prices settled lower on the day, with Brent futures down 82 cents at $111.28 a barrel and the U.S. West Texas Intermediate crude contract for June delivery, which expired on Tuesday, down 89 cents at $107.77.

Mounting inflation fears continued to drive up U.S. Treasury yields. The 30-year Treasury bond’s yield hit its highest in 19 years. It was last at around 5.18%. U.S. 10-year yields rose to their highest levels in more than a year.

Investors are closely watching rising yields, said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“We’re seeing the long end of the market continues to rise,” he said. “That is the reason why we’re seeing (stocks) on the defensive.”

Rising yields push up borrowing costs and mean a higher discount for future company earnings, challenging stock valuations. 

The all-important AI trade will be tested by earnings from chipmaker Nvidia due on Wednesday, with expectations sky-high for the world’s most valuable company. Results from Walmart and other retailers are also still to come this week. 

The Dow Jones Industrial Average fell 322.24 points, or 0.65%, to 49,363.88, the S&P 500 fell 49.44 points, or 0.67%, to 7,353.61 and the Nasdaq Composite fell 220.02 points, or 0.84%, to 25,870.71.

MSCI’s gauge of stocks across the globe fell 6.44 points, or 0.59%, to 1,091.79.

European stocks were higher, however, further recovering ground lost on Friday when they dropped 1.5% as bond market jitters spread to equities. 

Stocks in Europe, which is a net importer of energy and has fewer major tech firms, remain below pre-war levels and have lagged far behind their U.S. peers. The pan-European STOXX 600 index rose 0.19%.

US yields up again

Worries remain about a lasting inflationary shock from the Iran war, particularly from sharply higher energy prices.

The yield on benchmark U.S. 10-year notes rose 4.4 basis points to 4.667%, from 4.623% late on Monday. Yields move inversely to prices.

British bond yields fell after news reports said the most likely challenger to Prime Minister Keir Starmer will not overhaul the country’s borrowing rules.

The U.S. dollar was up in part because of the higher U.S. yields, driven by inflation fears and uncertainty over how new Federal Reserve Chair Kevin Warsh will respond if price pressures continue to accelerate.

Global rate hike expectations have been changing, and traders have started to price in higher probabilities for rate hikes from the Fed. Expectations have increased that policymakers will have to tighten policy to combat a resurgence in inflation driven by higher-for-longer energy prices.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,rose 0.34% to 99.33, with the euro down 0.45% at $1.1602.

Against the Japanese yen, the dollar strengthened 0.14% to 159.05.

Data on Tuesday showed that Japan’s economy grew by an annualized 2.1% in the first quarter, supporting expectations for a Bank of Japan rate increase in June.

Investors are also awaiting details of the government’s supplementary budget plan, which could further strain Japan’s already deteriorating public finances and weigh on the yen.

Gold eased as the dollar firmed. U.S. gold futures for June delivery settled 1% lower at $4,511.20.

UN cuts global growth forecast to 2.5%, blames Middle East crisis

The United Nations on Tuesday cut its forecast for global economic growth, saying the Middle East crisis had reignited inflationary pressures and heightened uncertainty.

A U.N. press release summarizing the mid-year update to the global body’s World Economic Situation and Prospects said :

Global GDP growth is forecast at 2.5% in 2026, compared with an estimated 3.0% in 2025, 0.2 percentage points below the January projection and well below pre-pandemic growth rates.

A modest recovery is projected at 2.8% in 2027.

Solid labor markets, resilient consumer demand, and AI-driven trade and investment are expected to provide support, but the downgrade underscores a further weakening of a subdued global outlook.

Surge in energy prices has delivered windfall gains for energy companies, but intensified cost pressures for households and businesses.

In developed economies, inflation is forecast to rise from 2.6 % in 2025 to 2.9% in 2026, and in developing economies from 4.2% to 5.2%.

Fertilizer supplies have been disrupted, pushing up costs, which could reduce crop yields, putting upward pressure on food prices.

Global financial markets have remained resilient, but inflation expectations have driven short-term bond yields higher.

The most severe damage is in Western Asia, where growth is projected to plunge from 3.6% to 1.4%, exacerbated by damage to infrastructure, trade, and tourism.

The United States is expected to remain comparatively resilient, with growth projected at 2.0 % in 2026, broadly steady from 2025 on strong household demand and tech investment.

Europe is more exposed, with reliance on imported energy straining households and businesses. EU growth is projected to slow from 1.5% to 1.1% and in Britain from 1.4% to 0.7%.

China’s diversified energy mix, sizable strategic reserves, and policy support are providing a buffer, with its growth projected to moderate from 5.0 % to 4.6 %.

India’s output is still expected to expand by 6.4 % against 7.5%. In Africa, average growth is projected to ease slightly, from 4.2% to 3.9%.

Additional reporting by Rae Wee in Singapore.

Copyright Reuters or USA Today Network via Reuters Connect.

This story was originally published May 19, 2026 at 3:49 PM.