The yields on U.S. Treasury bonds surged Wednesday as oil prices also climbed.<\/p>\n
The 10-year Treasury yield, which heavily influences consumer borrowing rates such as mortgages, rose as high as 5.08%, its highest level since June 2007. The 30-year Treasury yield hit 5.38%, also a level not seen since before the global financial crisis nearly two decades ago. <\/p>\n
European Brent oil rose to more than $101 per barrel, while U.S. crude oil jumped to nearly $92. Rising oil prices often translate into rising bond yields due to the effect that higher energy costs can have on inflation. <\/p>\n
On Tuesday, President Donald Trump had said that U.S. officials were communicating with Iranian representatives at the U.N. General Assembly, driving down oil prices and giving some optimism to markets about potentially ending the Iran war, now in its seventh month<\/a>.<\/p>\n But that hope quickly faded. <\/p>\n A readout of the U.S.-Iran discussions later Tuesday from U.S. special envoy Steve Witkoff on social media <\/a>said that the talks were \u201clengthy,\u201d but that there was still more work to be done, and the \u201cmediators will continue their work.\u201d Then, Wednesday morning, the U.K. maritime trade monitoring agency reported that a cargo vessel had been \u201cstuck by an unknown projectile\u201d in the Strait of Hormuz, a critical chokepoint for global energy supplies, which has remained at a near standstill for months as a result of the Iran war.<\/p>\n Trump also unsettled energy prices when he said Tuesday that he supported a ban on U.S. exports of diesel fuel.<\/p>\n \u201cI\u2019ve said \u2018Let\u2019s not send out the diesel,\u2019\u201d Trump said to reporters at the U.N. \u201cI\u2019ve called for it within my people. I\u2019ve been talking about it.\u201d<\/p>\n The energy industry on Wednesday warned that a ban on exports would spell even higher prices for Americans. \u201cRemoving U.S. diesel from the market could instead result in reduced refinery runs, global economic damage and even higher U.S. prices,\u201d the American Petroleum Institute said.<\/p>\n Energy Secretary Chris Wright also said a ban would not help to bring down prices. \u201cThe blunt tool of banning diesel exports definitely doesn\u2019t work,\u201d he said Wednesday morning, according to Reuters<\/a>.<\/p>\n Benchmark diesel futures surged as much 7% in European<\/a> trade after Trump\u2019s remarks.<\/p>\n On top of rising energy prices, fresh economic data points also helped propel Treasury yields higher.<\/p>\n \u201cUS business activity growth accelerated for a fourth successive month in September to reach the fastest rate for over five years,\u201d S&P Global reported in its latest purchasing managers index reading<\/a>. <\/p>\n \u201cFirms\u2019 input costs have meanwhile jumped in September at the steepest rate for four years, with fuel and transport costs spiking higher thanks to the rise in oil prices seen during the month, which will add further to the upward pressure on selling prices and inflation in the coming months,\u201d said Chris Williamson, chief business economist at S&P Global Market Intelligence.<\/p>\n Stocks fell as a result of the moves in yields and oil prices. As of midday, the Nasdaq Composite index had tumbled 1% and the S&P 500 had fallen 0.6%. The Dow declined 270 points.<\/p>\n Some of the stocks that were the biggest decliners were all inflation sensitive, such as travel stocks and large technology firms. <\/p>\n The S&P utilities sector, which contains many companies involved in the widespread buildout of data centers, was the biggest sector loser Wednesday. Higher interest rates could potentially add billions of dollars of costs to building AI infrastructure. <\/p>\n