This content was published on
August 31, 2026 - 17:00
5 minutes
(Bloomberg) — A flare-up in geopolitical risks sent stocks and bonds lower as oil climbed, raising concerns about inflationary pressures that could make the Federal Reserve raise interest rates.Escalating tensions in the Middle East drove US crude above $85, with higher energy costs lifting Treasury 10-year yields to the highest since January 2025. The S&P 500 trimmed its August advance.The US and Iran exchanged strikes for the first time in about a month as American forces hit an island in the Strait of Hormuz and the Islamic Republic launched attacks on the United Arab Emirates and Jordan. President Donald Trump told Fox News the US would respond, without giving details.Fresh hostilities dashed hopes for a Hormuz traffic normalization, with elevated oil prices reinforcing bets on higher rates after Fed Chair Kevin Warsh reiterated a commitment to bring down inflation. While much hinges on employment and inflation figures, money markets see a hike as more likely than not in September.“With traders tracking geopolitical volatility as well as potential seasonal volatility, it will be interesting to see which market impulse from last week might carry over to this week,” said Chris Larkin at E*Trade from Morgan Stanley. “Unexpectedly strong labor-market data might be taken as bad news by the market, since it could reinforce expectations for a rate hike.”The US jobs report Friday is expected to be consistent with general steadiness in the labor market that’s helping the Fed focus more intently on its battle with inflation. Economists estimate the data will show a 55,000 increase in August payrolls after an unexpected dip in July employment. Such a result would be broadly in line with average job growth this year.“With the labor market broadly intact, Fed Chair Warsh’s first Jackson Hole address confirmed the Fed’s focus remains squarely on inflation,” said Jason Pride and Michael Reynolds at Glenmede. “A report landing near consensus would reinforce the view that the timing of any future policy shift hinges more on the path of price pressures than on the pace of payroll growth.”Friday’s jobs report “will be critical,” with figures on consumer prices, due on Sept. 11, being the more important of the two prints, given Warsh’s view that the US is at full employment, according to JPMorgan Chase & Co.’s Andrew Tyler.He’s shifted from a tactically bullish to a cautious stance on US stocks, betting the next few weeks will be choppy for the market. But Tyler also says fundamentals from economics to earnings remain intact.“While the path ahead in the Middle East remains uncertain, we continue to believe the outlook for global equity markets is constructive, supported by robust profit growth and steady economic activity,” said Brock Weimer at Edward Jones.Corporate Highlights:Nvidia Corp. is investing $3.5 billion into MediaTek Inc., deepening collaboration with the Taiwanese chipmaker at a time when it’s working to persuade more companies to build chips that plug into its dominant data center ecosystem. Anthropic PBC’s IPO is casting a long shadow over companies’ US listing plans, as they try to find room for their deals to grab attention after the Sept. 7 Labor Day holiday. PG&E Corp., Edison International and Sempra plunged as an effort by California Governor Gavin Newsom to shift wildfire liabilities from the state’s utilities failed. GameStop Corp. said preliminary net sales for the second quarter will be between $780 million to $800 million, above the consensus estimate of $757 million. Eli Lilly & Co. plans to buy Merida Biosciences Inc. for as much as $2.88 billion in cash to expand in autoimmune and allergic diseases, part of an effort to build beyond the weight-loss and diabetes markets that made it the largest pharmaceutical company in the world. Some of the main moves in markets:StocksThe S&P 500 fell 0.4% as of 11 a.m. New York time The Nasdaq 100 fell 0.2% The Dow Jones Industrial Average fell 0.6% The Stoxx Europe 600 fell 0.5% The MSCI World Index fell 0.4% CurrenciesThe Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.3% to $1.1616 The British pound rose 0.1% to $1.3557 The Japanese yen rose 0.3% to 159.68 per dollar CryptocurrenciesBitcoin was little changed at $78,557.09 Ether fell 0.9% to $2,467.46 BondsThe yield on 10-year Treasuries advanced four basis points to 4.75% Germany’s 10-year yield advanced four basis points to 3.32% Britain’s 10-year yield advanced three basis points to 5.06% CommoditiesWest Texas Intermediate crude rose 2.2% to $85.26 a barrel Spot gold fell 0.5% to $4,434.35 an ounce ©2026 Bloomberg L.P.
