Wall St dips as Iran stalemate lifts oil price, yields

Wall Street's main indices have fallen to about two-week lows, pressured by losses in heavyweight technology stocks while fading hopes for a US-Iran peace deal sustained gains in oil prices and kept government bond yields at multi-year peaks.

Iran said it would shift to a "fully offensive" military posture because efforts to negotiate a permanent end to the war with the United States have stalled, while the US has ruled out extending a temporary ceasefire agreement that expired on August 17.

The developments pushed Brent crude futures up 0.5 per cent to about three-week highs.

The yield on the 30-year Treasury bond stood at its highest since 2007, while that on the benchmark 10-year maturity held near its highest level since January 2025.

"The yields are troubling people because it portends a tighter environment and it's going to be more expensive to borrow money," said Kim Forrest, chief investment officer at Bokeh Capital Partners.

"Especially in this whole AI thing where time to pay it back is uncertain. It makes for a nervous investor environment."

Most megacap and growth stocks declined as high government bond yields potentially lower the present value of future tech profits and increase corporate borrowing costs.

The S&P 500 Information Technology sector was the biggest drag, down 1.5 per cent.

Chip makers also came under heavy selling pressure, with the Philadelphia SE Semiconductor index falling 3.7 per cent to trade at its lowest in one week.

Investors flocked to healthcare and consumer staples stocks, considered traditionally defensive, amid the volatility.

The CBOE Volatility Index - commonly dubbed as Wall Street's "fear gauge" -jumped to its highest in about two weeks.

In early trading, the Dow Jones Industrial Average fell 132.55 points, or 0.25 per cent, to 53,327.23, the S&P 500 lost 35.37 points, or 0.46 per cent, to 7,709.69, while the Nasdaq Composite dropped 275.95 points, or 1.04 per cent, to 26,368.96.

Home-improvement retailer Home Depot was subdued in choppy trading even as it beat second-quarter sales estimates.

Strong earnings from several companies, including some AI hyperscalers, had pushed the S&P 500 and the Dow to all-time highs earlier this month.