Global stocks slip as oil jumps and bonds price ‘higher for longer’ rates

Global stocks fell on Monday as oil jumped on the stalemate in US–Iranian talks and Treasury trading pointed to investors preparing for interest rates to rise and stay higher for longer, Reuters reported.

Oil and Fed odds

Over the weekend President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz and said talks would continue this week. Brent futures rose about 4% to $108.5 a barrel, lifting September gains to roughly 20%. Oil futures were about 50% above levels before the war began in late February. Markets implied a 68% chance the Federal Reserve would hike for a second straight meeting in October, with around 90 basis points of tightening priced through late next year.

Yield curve and equities

Two-year Treasury yields — most sensitive to rate and inflation expectations — surged 56 basis points in September, the largest monthly rise since February 2023, narrowing their discount to 10-year yields to about 30 bps from about 40 bps a month earlier. On Monday, two-year yields were last up 5 bps at 4.914%; 10-year yields were up 4 bps at 5.22%. S&P 500 futures fell 0.5% and Nasdaq futures 1%; MSCI’s All-World index was down 0.2%. Chinese blue chips slid 1.9% overnight to a one-year low.

BMO chief FX strategist Mark McCormick said the bond market was “pricing US resilience and a higher equilibrium rate — while exposing economies less able to absorb higher borrowing costs.”