Wall Street under pressure: Iran conflict and rising interest rates are weighing on markets

There are signs of escalation in the Iran war, and Wall Street is reacting with concern. The price of oil is rising for the third day in a row, and concerns about rising interest rates are growing. Interest rate-sensitive tech stocks in particular are suffering significant losses.

Fading hopes for a peace solution in the Middle East and rising bond yields caused losses on Wall Street on Tuesday. The US standard value index Dow Jones lost 0.2 percent to 53,343 points. The technology-heavy Nasdaq fell 1.3 percent to 26,290 points and the broad S&P 500 lost 0.7 percent to 7,692 points.

Iran had previously threatened a fully offensive military posture and the government in Washington had ruled out extending the ceasefire. This pushed oil prices further higher for the third day in a row. Brent cost more than $91 a barrel. This threatens to cause inflation to rise again and interest rates to rise further. As a result, the yield on 30-year US Treasury bonds rose to its highest level since 2007, while 10-year bonds reached their highest level since January 2025.

The higher credit costs particularly affected interest rate-sensitive technology stocks. The semiconductor index fell sharply as investors sold stocks that had previously benefited from strong demand for artificial intelligence (AI). The biggest losers in the S&P 500 included chip companies such as Nvidia, with a loss of 2.3 percent, and the data storage specialists Sandisk and Western Digital, which lost 6.9 and 8.5 percent.

"It's almost like a domino effect: talks fail, which leads to rising oil prices, which in turn raises inflation expectations and raises bond yields," said Burns McKinney, portfolio manager at NFJ Investment Group. Whenever yields rise, this affects technology stocks disproportionately. Investors instead shifted their portfolios into defensive sectors such as healthcare and consumer staples.

The energy sector also benefited from rising oil prices. Wall Street's "fear barometer," the volatility index, climbed to its highest level since August 5. Bucking the negative trend, Home Depot shares rose slightly after the hardware store chain exceeded expectations with its sales figures for the second quarter. As the week progresses, investors will wait for the balance sheets of other retailers such as industry leader Walmart as well as the minutes of the US Federal Reserve's July meeting due on Wednesday. The next big test for the AI ​​rally is Nvidia's upcoming quarterly report.