NEW YORK — Surging government bond yields rattled global stock markets Thursday, offsetting hopes that artificial-intelligence demand can keep equity indexes climbing as Brent crude pushed back above $100 a barrel on Iran-war supply uncertainty.
The S&P 500 slipped about 0.1% after swinging between gains and losses and was on track for a seventh decline in eight sessions, according to Associated Press market coverage. The Dow fell roughly 188 points in morning trading; the Nasdaq was nearly flat. Losses hit harder in Europe: London’s main index dropped 1.7% and Paris 1.6% after the U.K. 10-year gilt yield spiked as high as 5.53% before oscillating.
Higher yields raise borrowing costs for households, businesses, and governments while competing with stocks for investor capital. Drivers include sticky inflation, oil-linked energy costs, resilient U.S. growth data, and large fiscal deficits. Brent crude climbed about 2.8% to $100.76 Thursday as traders debated when Middle East fighting will let oil flows normalize.
U.S. data reinforced the “higher for longer” narrative. Weekly jobless claims fell, a revised spring GDP print showed stronger growth than first estimated, and the Institute for Supply Management said manufacturing expanded in September with faster price increases — a signal that could keep inflation pressure alive. The 10-year Treasury yield briefly neared 5.34% after the factory report before easing to about 5.29%, near its highest level since 2002 and up from under 5% last week and under 4% before the Iran war began.
Real-estate stocks in the S&P 500 lagged as higher yields squeeze property financing and divert income-seeking investors toward bonds. Technology offered a partial cushion after Micron Technology beat quarterly profit estimates and guided above Wall Street forecasts. CEO Sanjay Mehrotra credited AI-driven memory demand. Micron shares still slipped after a year-to-date surge of more than 270%, but Nvidia rose about 1% and Applied Materials jumped more than 4%. Accenture soared over 20% on a strong consulting-profit report. Asia outperformed on the Micron readout, with Japan’s Nikkei up 3.3%.
For Arizona homeowners and small businesses, multidecade-high Treasury yields feed into mortgage and commercial loan rates just as gasoline and diesel costs remain elevated. Midterm campaigns already hammer living costs; Thursday’s bond move underlines how Iran-linked energy risk and fiscal deficits can tighten financial conditions even when AI chip optimism briefly lifts the Nasdaq.
The mix of strong growth data and rising yields is a classic late-cycle tension. If the economy keeps adding jobs and factories keep expanding while oil stays near $100, markets may price fewer rate cuts — or even a renewed risk of tighter policy — even as politicians campaign against high living costs. Mortgage rates keyed off the 10-year Treasury would stay elevated, cooling home sales in Phoenix, Tucson, and other Sun Belt markets that rode the pandemic boom.
AI optimism is not gone; it is selective. Chipmakers tied to memory and fabrication equipment caught a bid from Micron’s guidance, while rate-sensitive sectors such as real estate and parts of consumer discretionary lagged. That bifurcation matches the “wealth effect” story markets have told all year: equity holders feel richer, borrowers feel squeezed.
Traders will watch whether Brent holds above $100 and whether U.S. Treasury yields settle below the 5.3% spike. Until Iran-war risk fades and fiscal deficits look less open-ended, bond volatility is likely to keep interrupting the AI-led equity narrative that has dominated 2026.