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May 28, 2026 - 07:01
5 minutes
(Bloomberg) — Stocks and bonds fell while oil climbed after fresh attacks in the Middle East hurt optimism for a deal to end the war. The dollar gained.The MSCI All Country World Index, the broadest gauge of global equities, retreated from a record high, falling 0.4%. An index of Asian shares slid 2%, snapping a five-day rally fueled by expectations over a peace deal and surging tech stocks. Futures contracts indicated the losses would spread to the US and Europe.Brent crude climbed almost 3.7% to about $98 a barrel as US forces carried out airstrikes on an Iranian military site and imposed new sanctions to prevent Tehran from profiting from vessels transiting the Strait of Hormuz. US authorities described the airstrikes as defensive. Iran said it targeted a US airbase.As sentiment soured, the dollar, the haven of choice during the Middle East conflict, climbed. Treasuries fell as higher oil prices stoked inflation concerns, with the yield on the benchmark 10-year climbing four basis points to 4.53%. Gold declined 1.9% to $4,370 an ounce, while Bitcoin fell to a six-week low.“Markets are getting itchy feet waiting for this US-Iran deal to materialize,” said Tim Waterer, chief market analyst at KCM Trade. “The latest tit-for-tat strikes feel distinctly incongruous with claims that talks are going well. This stop-start cycle is starting to wear on investor patience.”The latest attacks dented optimism that a peace deal would ease oil prices and support global growth, weighing on market sentiment after a rally that pushed equities to record highs. A key test comes later Thursday with the release of the April personal consumption expenditures index — the Fed’s preferred inflation gauge — as investors assess whether elevated energy prices will keep inflation and interest rates higher for longer.Earlier, President Donald Trump said he was “not satisfied” in negotiations with Iran, damping expectations for an imminent breakthrough. Trump asserted that no one nation would control the Strait of Hormuz, highlighting a key sticking point in resolving the conflict as it enters its fourth month.Also, a US official said American forces had shot down a quartet of one-way Iranian attack drones that were fired at a commercial ship, and also struck another Iranian drone-launching unit in Bandar Abbas, near the vital Strait of Hormuz.Iran targeted the American airbase from which the attack originated, according to a report, which cited the Islamic Revolutionary Guard Corps. Kuwait said it’s responding to hostile missile and drone threats.“Markets are now reacting to what is clearly an escalation of hostilities in the Gulf,” said Nick Twidale, chief market analyst at AT Global Markets. “We’ve seen a lot of hope in the market for the last couple of days that negotiations will lead to a deal and that is looking much more distant now.”Elevated energy prices and inflation risks are complicating the outlook for central banks as traders turn their focus to Thursday’s economic data.The PCE price index rose 3.5% from a year earlier in March and economists anticipate an increase to 3.8% in April. That’s well above the long-run rate of 2% targeted by the Fed.Fed Vice Chair Philip Jefferson said he expects inflation to cool later this year as the effects of tariffs and higher energy costs wear off, though he warned inflationary risks remain tilted to the upside. Earlier, Fed Governor Lisa Cook said inflation is headed in the wrong direction and she would be prepared to raise interest rates if that persists.“I want to be clear about my risk assessment: The risks remain tilted toward higher inflation,” Cook said Wednesday.Some of the main moves in markets:StocksS&P 500 futures fell 0.4% as of 1:57 p.m. Tokyo time Japan’s Topix fell 1.1% Australia’s S&P/ASX 200 fell 1.6% Hong Kong’s Hang Seng fell 2.3% The Shanghai Composite fell 0.1% Euro Stoxx 50 futures fell 1.2% CurrenciesThe Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.3% to $1.1592 The Japanese yen was little changed at 159.59 per dollar The offshore yuan fell 0.1% to 6.7858 per dollar CryptocurrenciesBitcoin fell 2.8% to $73,051.29 Ether fell 4% to $1,978.29 BondsThe yield on 10-year Treasuries advanced five basis points to 4.53% Japan’s 10-year yield advanced 1.5 basis points to 2.695% Australia’s 10-year yield advanced six basis points to 4.91% CommoditiesWest Texas Intermediate crude rose 4% to $92.19 a barrel Spot gold fell 1.8% to $4,373.03 an ounce This story was produced with the assistance of Bloomberg Automation.–With assistance from Winnie Hsu, Aya Wagatsuma and Masaki Kondo.©2026 Bloomberg L.P.
