U.S. stock index futures pointed to a muted open on Wednesday after the 10-year Treasury yield climbed to its highest level since November 2023. Fresh U.S. airstrikes on Iran pushed oil to five-week highs and deepened a global bond selloff, dragging major stock benchmarks lower across Asia and Europe.
Iran Strikes Push Oil Higher
The U.S. struck Iranian military targets near the Strait of Hormuz, while Tehran said it had targeted U.S. assets across the region, marking the most significant exchange of fire in weeks. Fears of further disruption to energy supplies lifted Brent crude futures 0.1% to $94.87 a barrel, a five-week high. According to Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management: "The recent increase in energy prices has put additional upward pressure on bond yields"
Treasury Yields Reach Multi-Year Highs
In Treasury markets, the 10-year yield rose 1 basis point to 4.81%, touching an intraday high of 4.814%, its highest level since November 2023. The 30-year Treasury yield added 2 basis points to 5.286%, while the 2-year note held near flat at 4.4%. Rising yields tend to support the dollar as a safe-haven asset while reducing demand for equities and other riskier investments.
Stock Benchmarks Fall Worldwide
MSCI's gauge of global stocks fell 0.2%, hovering near a one-month low. The pan-European STOXX 600 slipped 0.3% after sharper losses in Asia, where South Korea's KOSPI dropped almost 4% and the Nikkei 225 fell 2.9%. U.S. stock index futures pointed to a muted open.
Rate-Hike Bets Climb Ahead of Fed Meeting
Hawkish comments from Federal Reserve Chair Kevin Warsh had already pushed investors to raise bets on another U.S. interest rate hike before the escalation in the Middle East. Fed funds futures now imply a 68% chance of a 25-basis-point rate increase this month, up from 37% a week ago, according to CME Group's FedWatch tool. ADP private payrolls data is due Wednesday, with the nonfarm payrolls report following Friday, ahead of the Fed's September 16 meeting.
Sources: CNBC, Reuters via Investing.com
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