Oil and Bond Yields Rattle Global Markets as Iran Truce Expires

London, 18 August 2026 — EBM Newsdesk Analysis —

Global markets came under renewed pressure on Tuesday as the expiry of the US-Iran ceasefire pushed oil prices higher, lifted government bond yields and revived fears that another energy shock could prolong inflation.

Technology shares suffered the heaviest selling, with investors already questioning the scale and financing of the artificial intelligence investment boom. The combination of geopolitical risk, expensive energy and rising borrowing costs has interrupted a period of relative calm across global markets.

Asian technology shares lead declines

Japan’s Nikkei 225 fell 2.5 per cent as technology companies bore the brunt of the retreat. The country’s 10-year government bond yield climbed to its highest level in three decades, reflecting expectations of further monetary tightening by the Bank of Japan as well as growing concern about Japan’s fiscal position.

South Korea’s Kospi declined 1.6 per cent following Monday’s market holiday. Samsung Electronics lost 2 per cent, while SK Hynix advanced 0.9 per cent in Seoul before its US-listed shares fell sharply in early trading.

Australia’s ASX 200 finished broadly unchanged. Hong Kong’s Hang Seng and the Shanghai Composite each gained approximately 0.2 per cent, while India’s Nifty 50 was down 0.4 per cent approaching the close.

The deterioration in sentiment followed the expiry of the temporary US-Iran agreement. Hopes of a rapid diplomatic breakthrough weakened after President Donald Trump said he saw no reason to extend the ceasefire and threatened military action against Oman if it obstructed US policy in the region.

Oman has been involved in negotiations with Iran over the Strait of Hormuz, where commercial shipping remains severely restricted.

European stocks surrender August gains

European equities extended their decline, sending the Euro Stoxx 50 to a two-week low. France’s CAC 40 erased its gains for August, while Germany’s DAX fell to its weakest level in 10 days.

Energy groups including BP and Shell benefited from higher crude prices, but their gains were insufficient to support the broader market. The FTSE 100 continued its retreat from the end of July and moved back towards support around 10,700, its lowest level since July 24.

The sell-off reflects more than immediate concern about the Middle East. Investors must also contend with higher government borrowing costs, weaker economic momentum and the prospect that central banks will keep monetary policy restrictive for longer.

Iran has indicated that it is moving towards a more offensive military posture, while reports that Tehran detained a UAE-linked tanker added to uncertainty surrounding the region’s oil-export infrastructure.

Wall Street’s AI trade comes under pressure

US equities opened lower following Monday’s declines. The Nasdaq 100 fell more than 1 per cent in early trading, with semiconductor companies leading the retreat.

Micron, Marvell and the US-listed shares of SK Hynix lost approximately 5 per cent, while Intel declined about 4 per cent. Nvidia, which reports earnings next week, fell more than 2 per cent.

The previous session had already left the Dow Jones Industrial Average and S&P 500 down 0.5 per cent. The Nasdaq Composite lost 0.3 per cent, while the smaller-company Russell 2000 declined 0.4 per cent.

Higher oil prices were one catalyst. Another was Nvidia’s announcement of financing worth as much as $105bn for a planned OpenAI data-centre campus in Ohio.

The sheer scale of the commitment has reinforced concerns about the increasingly circular nature of AI financing. Chipmakers, cloud providers and model developers are funding one another’s expansion while relying on future demand to justify present investment.

The technology may ultimately support exceptional growth, but markets are becoming less willing to treat every large capital commitment as evidence of future value. Investors increasingly want to know when the spending will translate into durable cash flow.

Treasury yields compound the pressure

Long-dated US Treasury yields continued to rise, with the 30-year yield approaching its highest level in two decades.

America’s expanding debt burden and the volume of new government bonds required to finance federal spending are already testing demand. Investors are also considering whether Japanese institutions could reduce their Treasury holdings and return capital home as Japan’s own yields rise.

Higher oil prices add another layer of risk by threatening to revive inflation. Yet the probability of a Federal Reserve increase at next month’s meeting has fallen from about 50 per cent to 34 per cent following softer inflation data, weaker payroll figures and disappointing retail sales.

That leaves the Fed facing an uncomfortable split between energy-led inflation and signs of deteriorating domestic demand.

Corporate results from Home Depot, Target, Lowe’s, TJX and Walmart should provide further evidence about the health of American consumers.

Oil climbs as Hormuz remains restricted

Brent and West Texas Intermediate crude reached their highest levels of August. WTI approached resistance around $85 a barrel after rising almost 4 per cent during the previous session.

Iranian media reported that Tehran had seized a UAE-linked tanker, while a separate vessel was reportedly struck by an unidentified projectile while leaving the Strait of Hormuz. Commercial traffic remains at a fraction of its pre-conflict level despite claims from Washington that the US controls the waterway.

The more surprising feature of the market is that crude has not returned above $100. Traders continue to place some probability on a negotiated settlement, while expectations of slowing global demand are restraining prices.

That confidence could prove fragile. An extended closure of Hormuz would expose the difference between a market pricing geopolitical tension and one confronting a sustained physical shortage.

Gold struggles despite geopolitical risk

Gold briefly rose to $4,436 before reversing below $4,400, ending a two-session advance. The dollar’s recovery from a 10-week low outweighed the metal’s traditional appeal during periods of geopolitical uncertainty.

Gold has repeatedly been drawn back towards $4,400, turning the level into an important test. A sustained failure to break higher could expose the market to a retreat towards $4,000. Holding above it would strengthen the case for another rally.

Silver remained close to $65 and within its recent range of $63.50 to $66.80.

Attention will now turn to Wednesday’s Federal Reserve minutes. They may clarify whether policymakers regard energy-driven inflation as requiring higher rates or believe weakening employment and consumer spending deserve greater weight.

Markets confront an uncomfortable combination

The immediate trigger for Tuesday’s losses was geopolitical, but the deeper concern is economic. Investors are confronting higher energy costs, rising bond yields, enormous technology spending and early evidence of weaker consumer demand at the same time.

Markets can tolerate expensive oil when growth is strong. They can tolerate high yields when inflation is falling and corporate profits are accelerating. The difficulty arises when each source of resilience starts to weaken simultaneously.

The expiry of the ceasefire has not yet produced a full market rupture. But it has removed one of the assumptions supporting the summer rally: that the Middle East’s energy risk was gradually being contained.