US-Iran Tensions Drive Asian Markets Down and US Bond Yields Up Amid Inflation Concerns

Global markets opened lower following escalating tensions between the US and Iran. President Trump's threat to bomb Oman and Reuters reports that Iran may shift from a defensive to an offensive stance heightened market fears. Oil prices rose sharply, with Brent crude around $91 per barrel and WTI near $84. US government bond yields surged to nearly two-decade highs, with the 30-year yield surpassing 5.3% and the 10-year yield reaching 4.72%, reflecting inflation worries.

Asian stock markets declined significantly, with Tokyo down over 2%, Seoul falling about 1.5%, Hong Kong losing 0.7%, and Shanghai dropping 0.4%. US futures also weakened, indicating a cautious start to trading. On Wall Street, the Dow Jones and S&P 500 each fell approximately 0.5%, while the tech-heavy Nasdaq declined 0.3%. Energy stocks were an exception, rising nearly 0.9% due to climbing oil prices.

In contrast, semiconductor stocks showed gains, with the DRAM ETF up over 5% and the broader SOXX ETF rising more than 1%, buoyed by reports of strong revenue growth from AI company Anthropic. Key upcoming earnings include Home Depot, BHP, Target, and Walmart, which will provide insight into consumer and commodity market conditions.

The Israeli market also reacted negatively, with the Tel Aviv 35 index dropping 0.7%, Tel Aviv 125 down 1.1%, and Tel Aviv 90 falling 2.7%, marking the weakest day for mid-cap stocks in two months. The cleantech sector led losses with a 3.7% decline, followed by real estate, construction, and banking sectors. Insurance stocks were the only sector to close higher, supported by positive quarterly results from Migdal.

Market strategists noted that the sustained high US bond yields despite recent soft inflation data create headwinds for investors. Analysts from ING highlighted the absence of calming statements from the Trump administration, signaling no imminent resolution to the US-Iran conflict after the expiration of a fragile 60-day ceasefire.