As cease-fire talks between the United States and Iran stalled and the two sides resumed armed clashes, all three major New York stock indexes fell. Investor sentiment appeared to weaken as international oil prices surged on rising Middle East tensions and Government Bonds yields climbed again.
On the 3rd (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed down 1.21% at 50,687.07 from the prior session. The Standard & Poor's (S&P) 500 fell 0.74% to 7,553.68, and the Nasdaq slid 0.89% to 26,853.98. With the day's drop, the S&P 500 and the Nasdaq ended their nine-session winning streaks.
The mood was shaken by a geopolitical risk from the Middle East. Early that morning, the Islamic Revolutionary Guard Corps (IRGC) said it attacked a U.S. Air Force base in Kuwait and the U.S. Navy's 5th Fleet base in Bahrain in retaliation for recent attacks on an Iranian oil tanker and communications facilities on Qeshm Island.
Earlier, U.S. forces struck a radar facility on Qeshm Island on the 1st and then disabled an Iranian oil tanker with a missile on the 2nd. Although the United States and Iran are continuing cease-fire talks, the lack of progress and renewed military actions by both sides heightened market anxiety.
The oil market reacted immediately. Brent crude futures finished at $97.81 a barrel, up 1.9% from the prior session, while West Texas Intermediate (WTI) futures rose 2.4% to $96.02 a barrel.
Rising oil prices also affected the bond market. On expectations that inflationary pressure could increase, Government Bonds yields rose. According to the electronic trading platform Tradeweb, around the close of the New York stock market the 10-year U.S. Government Bonds yield was 4.49%, up 0.03 percentage point from the previous day. In intraday trade, it briefly topped 4.5%. The 30-year Government Bonds yield also climbed to 4.99%, briefly surpassing the 5% level during the session.
Meanwhile, U.S. employment data came in stronger than expected. Payroll firm ADP said U.S. private-sector employment in May increased by 122,000 from the previous month, the biggest gain since January last year.