Yields rise, stocks ease, with oil gaining as US and Iran resume military attacks

Bond yields climbed and stocks declined on Monday as oil prices surged more than 2 percent, following renewed military confrontations between the United States and Iran. President Donald Trump vowed to "hit them hard" after Iran targeted two U.S. air bases in Jordan with missiles in retaliation for an American strike on Iran's Larak Island.

Brent crude futures increased by $2.39, or 2.71 percent, to $90.49 per barrel, while U.S. West Texas Intermediate crude climbed $2.36, or 2.83 percent, to $85.76. Brent's price peaked during the session since August 25, keeping the threat of additional interest rate hikes from leading central banks alive. Federal Reserve Chairman Kevin Warsh's speech at Jackson Hole on Friday fueled expectations of a September Fed rate increase, with Fed funds futures traders pricing in a 65 percent chance of such a hike, up from around 35 percent prior to Warsh's remarks.

U.S. Treasury yields rose and the dollar weakened as investors anticipated a possible September Fed rate hike. Wall Street suffered, with the Dow Jones Industrial Average sliding 374.09 points, or 0.70 percent, to 53,185.90, the S&P 500 dropping 25.62 points, or 0.33 percent, to 7,686.14, and the Nasdaq Composite falling 31.53 points, or 0.12 percent, to 26,370.89.

Economists warn that the market is entering a typically challenging month for stocks, with September historically performing poorly.