Rising oil prices and high bond yields are weighing on Wall Street

Rising oil prices are giving US investors a bad start to the week. All indices are sliding into the red, bond yields are reaching 19-year highs. Things aren't looking rosy for Boeing either.

Rising oil prices and record high bond yields are once again slowing down Wall Street. The Dow Jones Index lost 0.7 percent to 51,481 points and the broader S&P 500 fell 0.8 percent to 7,683 points. The index of the technology exchange Nasdaq slipped almost one percent to 26,820 points. US President Donald Trump's rejection of an Iranian peace plan to open the Strait of Hormuz drove oil prices up more than four percent at times, fueling concerns about stubborn inflation and further interest rate hikes.

"We're in a one-factor world right now where oil prices influence interest rates and interest rates are the main driver for all asset classes," said Mohit Kumar, an economist at Jefferies. The expectation that increased oil prices will drive up inflation and thus encourage central banks to raise interest rates once again weighed on government bonds. In return, the yields on ten-year federal bonds and US government bonds with the same maturity rose to up to 3.649 and 5.234 percent. They thus reached new 17- and 19-year highs.

Traders now see the probability of an interest rate hike by the US Federal Reserve in October at a good 70 percent. The Fed had already raised interest rates by a quarter of a percentage point at the beginning of the month and signaled further steps. In addition, the head of the Cleveland Fed branch, Beth Hammack, expressed concern on Friday about stubbornly high inflation. Investors' focus now turns to a range of US economic data this week, including the Fed's key inflation data and the jobs report.

Oil price rise crumbles at market close

Prices on the crude oil market initially rose by more than four percent after US President Donald Trump rejected Iran's conditions for reopening the Strait of Hormuz, which is important for oil and gas transport, over the weekend. During the course of trading, however, the plus collapsed again as it was expected that mediators from Qatar would hold talks with the USA and Iran.

In addition, crude oil exports from the Middle East's major producers recovered in September to their highest level since the start of the war in February, preliminary data from analysis firm Kpler showed. "Despite increased shipping traffic through the Strait of Hormuz, delivery volumes remain below pre-conflict levels, leaving the market still undersupplied," said UBS analyst Giovanni Staunovo. Crude oil inventories in the US strategic oil reserve fell to 283.8 million barrels, the lowest level since October 1982, data from the US Department of Energy show. The background was an agreement to release 172 million barrels from the reserve.

Nvidia asked - Boeing in decline

When it comes to individual stocks, the announcement of a record share buyback program at Nvidia provided a tailwind. The US chip giant's shares climbed more than three percent at times. Nvidia has announced a $150 billion increase to its stock buyback program - the largest ever, surpassing even Apple's in 2024.

Meanwhile, a report about a new software error in the 737 MAX aircraft hit Boeing. The US aircraft manufacturer's shares fell by almost seven percent after the Wall Street Journal reported that Boeing had identified a previously unknown software error that could lead to an automatic navigation function failing during landing. Analysts at Jefferies said the flaw could delay approval of the MAX 10 variant and hamper deliveries of the MAX 7 if the Federal Aviation Administration (FAA) deems it a safety risk. Boeing said it informed all 737 operators about the software problem last month.

Tesla shares fell four percent after JP Morgan cut its price target on the stock due to weak deliveries in the third quarter.