Oil prices climb, bond yields rise as US-Iran ceasefire expires

Oil prices and bond yields surged on August 18, thwarting modest stock gains as the US-Iran ceasefire ended and Tehran signaled a more aggressive military stance. MSCI's Asia-Pacific index outside Japan rose 0.8%, driven by South Korea's KOSPI climbing over 3%. The Nikkei 225 fell 0.3%, while S&P 500 e-mini futures remained unchanged.

The US 10-year Treasury bond yield increased 0.8 basis points to 4.728%, while its 30-year counterpart climbed 0.6 basis points to 5.3146%, marking its highest level in over two decades. ING analysts noted that bond yields typically rise above 4.65% for the US 10-year, prompting positive comments from the Trump administration about resolving the Iran conflict.

However, they observed no such optimism this time. The 10-year Japanese government bond yield surged 2.5 basis points to 2.945%, a 30-year high. On Wall Street, the S&P 500 declined 0.5%, and the Nasdaq Composite fell 0.3%, as weak US economic data, including a surprise drop in retail sales, led to a risk-averse market sentiment.

President Trump reiterated his lack of interest in prolonging the truce with Iran, exacerbating Middle Eastern tensions and driving oil prices upward, further complicating market sentiment. The US dollar index traded near a two-month low of 99.527. Oil prices surged over $2 per barrel on August 17 due to the stalemate, refocusing traders on supply concerns in the Middle East.

Brent crude futures rose 0.2% to $91.06 per barrel, while gold gained 0.1% to $4,420.07, extending recent gains for a third day. Bitcoin increased 0.1% to $64,398.48, and ether rose 0.3% to $1,911.40.