Stocks mostly drop as Middle East hopes dim, interest rates rise

Stock markets declined across the globe on Tuesday as the US-Iran truce expired without resolving tensions in the Middle East. The tech-heavy Nasdaq suffered the largest drop, falling about 1.3% due to Nvidia's 2% decline and Intel's 7% drop. This followed a surge in government bond yields, reaching their highest levels in nearly two decades, which added to investors' concerns about inflation.

While some US economic data had eased worries about an imminent Federal Reserve rate hike, traders remained skeptical due to the ongoing energy price issues. The US 10-year Treasuries yielded over 4.7%, a level not seen since 2007, causing unease among borrowers and tech companies planning AI investments. Neil Wilson, an investor strategist, warned that the rising bond yields globally could threaten equity valuations and complicate matters for indebted nations.

The Middle East crisis was a significant factor, as the lack of progress towards reopening the Strait of Hormuz intensified inflation fears. The tech-heavy Nasdaq led the decline, with its sharp drop contributing to a third consecutive decline for New York's three main indices. In contrast, European markets saw a similar trend, with all three closing almost a percent lower.

London's index, however, benefited from higher oil prices, with BP and Shell shares increasing by almost 3% and 2%, respectively. The Brent benchmark remained above $90 a barrel, indicating that the chances of an agreement between Washington and Tehran were slim.