Wall Street opened the week under pressure Monday as a jump in Treasury yields to a 19-year high and a fresh spike in oil prices sent stocks lower, after President Trump rejected an Iranian proposal to reopen the Strait of Hormuz. The Dow Jones Industrial Average fell 347.11 points, or 0.67%, to close at 51,481.51. The S&P 500 slid 0.77% to 7,683.69, and the Nasdaq Composite dropped 0.92% to 26,820.38.
The bigger story was in the bond market. The benchmark 10-year Treasury yield climbed as much as 11 basis points to 5.27%, its highest level in 19 years, while the 30-year rate jumped to 5.55%. Rising yields make borrowing more expensive for companies and consumers alike, and they tend to pressure stock valuations by making bonds a more competitive alternative to equities.
Iran rejects a conditional olive branch
The catalyst was geopolitical. Iran had offered over the weekend to reopen the Strait of Hormuz — the chokepoint through which roughly a fifth of the world's oil supply flows — within seven days, on the condition that Washington end what Tehran called "acts of aggression," lift its naval blockade and economic sanctions, and release frozen Iranian assets. Trump rejected the offer and, according to people familiar with his thinking, told aides he expects U.S. strikes on Iran to resume after November's midterm elections.
Brent crude, the international benchmark, gained nearly 3% to top $107 a barrel, briefly touching above $108.50 intraday before paring gains. The conflict, which began in February, has kept the strait effectively disrupted for months, and traders have grown accustomed to sharp price swings tied to diplomatic signals out of Washington and Tehran.
Geopolitical risk will define the start of the new trading week after a stall in diplomatic progress between the U.S. and Iran over the weekend.
Kyle Rodda, market analyst, Capital.com
The Fed's inflation problem
The yield spike compounds a policy shift already underway at the Federal Reserve. Earlier this month, the Federal Open Market Committee voted unanimously to raise its benchmark rate by a quarter point to a range of 3.75%-4%, its first increase in years, after core personal consumption expenditures inflation ran above 3% every month of 2026. Policymakers cited both persistent price pressures and geopolitical developments — a direct reference to the energy-driven inflation risk now back in focus. Investors are pricing roughly even odds of another hike at the Fed's October meeting.
The combination of higher energy costs and a more hawkish Fed has rippled across asset classes. Gold, often a haven in times of conflict, instead fell as investors weighed the prospect of higher-for-longer rates against geopolitical risk, a dynamic that has puzzled some strategists used to the metal rallying on war headlines.
For now, traders are watching two things: whether Tehran signals renewed willingness to negotiate before strikes could resume, and whether Wednesday's economic data cements expectations for the Fed's next move. A further rise in long-term yields would put additional strain on rate-sensitive sectors, including housing and small-cap equities, that have already lagged the broader market this year.
