Daily Summary: Wall Street Under Pressure as U.S. Bond Yields Rise Above 5%

📈 Wall Street

• Today's session on the New York Stock Exchange did not provide investors with reasons for optimism, and major U.S. indices remained under pressure.
• One of the main sources of concern was the sharp rise in U.S. Treasury yields – the 10-year U.S. Treasury yield once again crossed the 5% level, reaching its highest levels since 2007.
• Rising bond yields mean a higher cost of money for the entire economy and increase pressure on equity valuations, which is felt particularly strongly by technology companies, whose valuations are more sensitive to interest rate levels.
• During the session, the Dow Jones fell by about 0.9%, the S&P 500 by about 0.5%, and the Nasdaq by about 0.8%.

🌍 Stock Market – Europe

• It was not a successful day for European trading floors either – the Stoxx Europe major indices ended the session with declines, mainly due to the sharp rise in oil prices and bond yields.
• The UK's FTSE 100 lost about 0.4%, France's CAC 40 about 0.3%, while Germany's DAX and Spain's IBEX 35 ended the day with slight declines.
• Investors fear that sustained high energy prices will lead to a resurgence in inflation, which could force the European Central Bank to maintain a restrictive monetary policy for a longer period.
• An additional issue impacting market uncertainty remains the geopolitical situation in the Middle East and the risk of oil supply disruptions.

🏛️ Macroeconomics & Central Banks

• Investors are looking with increasing focus toward tomorrow's U.S. Federal Reserve interest rate decision.
• The market almost unanimously expects a 25 basis point hike in the benchmark interest rate – the probability of this scenario reaches around 92% (compared to around 59% a week ago).
• The rate hike itself is largely priced in, making the central bank's stance regarding upcoming months crucial, focusing on inflation, extremely high energy prices, and the possibility of further monetary policy tightening.
• Signals from Donald Trump's administration indicate that the President will respect Federal Reserve decisions, although he has long favored lower interest rates and raising the cost of money is unlikely to please him.
• If the Federal Reserve suggests that high oil prices may force keeping rates higher for longer, pressure on stocks and risk assets may intensify; conversely, a dovish statement could provide a clear rebound impulse.
• Tomorrow's decision remains one of the most critical events of the week for global financial markets.

🛢️ Commodities & Energy

• The highest volatility was observed in the oil market – prices spiked sharply following an attack that damaged the key Saudi East-West pipeline.
• This is critical infrastructure as it enables oil transport from the Persian Gulf to the Red Sea while bypassing the Strait of Hormuz, and repairs could take from 3 to 5 weeks.
• The pipeline recently transported between 2.6 and 4 million barrels of oil per day (up to ~4% of global supply); additionally, Saudi Arabia curtailed some deliveries to European refineries.
• Supply problems are simultaneously emerging in several other regions, including Libya, Kazakhstan, and Russia, further exacerbating supply availability concerns.
• The situation is further complicated by risks surrounding maritime transport – a potential closure of the strategic Strait of Hormuz could have severe consequences for the global economy.
• Consequently, Brent crude oil surpassed $109 per barrel, while U.S. WTI crude oil traded above $106 per barrel.
• Such a sharp increase in oil prices raises production, transport, and overall operational costs across the economy, creating a direct risk of re-igniting inflation.

🌐 Geopolitics

• Donald Trump is signaling U.S. readiness for talks with Iran, suggesting that Tehran may be interested in reaching a quick agreement.
• However, there is no diplomatic breakthrough yet – Iran remains cautious, and the future of the Strait of Hormuz remains a core point of contention.
• Any potential de-escalation would reduce supply disruption risks and lower oil prices, but the market remains very cautious in pricing in such a scenario until concrete developments occur.
• Meanwhile, tensions around Yemen are escalating – Iran-backed Houthi forces continue missile and drone strikes against Saudi targets, promising further attacks against infrastructure and maritime transport.
• A major threat is potential supply disruption through the Bab al-Mandab Strait (connecting the Red Sea to the Gulf of Aden), creating the risk of simultaneous disruptions at two vital chokepoints (Hormuz and the southern entrance to the Red Sea), which could further drive up energy commodity prices.

🥇 Precious Metals

• Sentiment in the precious metals market was mixed today: gold prices fell slightly to around $4,300 per ounce, while silver remained under light selling pressure around $63–$64 per ounce.
• On one hand, geopolitical tensions and inflation fears provide support; on the other hand, the sharp rise in U.S. Treasury yields weighs against gold and silver.
• Investors face a choice between non-yielding metals and high-yielding bonds, which become more attractive as yields rise.

🪙 Cryptocurrencies

• Digital assets also experienced a deterioration in sentiment as investors reduced exposure to riskier assets.
• Bitcoin approached the $76,000 level during the day, while Ethereum traded around $2,500.
• The primary pressure on cryptocurrencies comes from rising U.S. bond yields and expectations regarding U.S. monetary policy (high interest rates typically reduce appetite for higher-risk assets).
• Bitcoin currently remains influenced by the same macro factors affecting U.S. tech stocks: the cost of money, bond yields, and overall investor risk appetite.