Bond Yields Rose And U.S.-Iran War Escalated Again. Stocks Fell.

Stocks dropped on Tuesday as bond yields continue to rise globally and hostilities between the U.S. and Iran escalate again.

The S&P 500 fell 0.71%, while the Dow Jones Industrial Average did so by 0.79%. The tech-heavy Nasdaq Composite underperformed, falling 1.03%.

Bond yields around the world climbed amid concerns that another burst of energy inflation could keep interest rates elevated.

Japan's benchmark 10-year government bond yield touched 3% for the first time since 1996, while the two-year yield climbed to its highest level in more than three decades. The selloff spread across Europe and the U.S., where the 10-year Treasury yield rose to about 4.79%, its highest since January 2025.

Elsewhere, Federal Reserve Governor Michael Barr said he will support an interest rate hike if inflation doesn't ease.

Speaking at a banking forum in Washington, Barr, who votes on FOMC decisions, said he's concerned about "broader price pressures taking hold."

"If trends in the data give me some confidence that inflation is moderating on a path to 2%, then I think we can take a bit more time to assess our policy stance," Barr said. "However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates."

The war is also escalating on Tuesday. The U.S. military conducted a new round of strikes against Iran in the Strait of Hormuz on Tuesday, the U.S. Central Command said.

"Today at 12 p.m. ET, U.S. forces began striking Islamic Revolutionary Guard Corps (IRGC) targets in Iran. The strikes follow recent attempted attacks by the IRGC against commercial shipping in the Strait of Hormuz and against American service members deployed to the region," CENTCOM said in a social media post. Attacks took place in Bandar Abbas, Jask, Chabahar, Konarak, Minab, Sirik, and the islands of Qeshm and Lavan.

Hours earlier, maritime security consultant Marisks noted that two tankers had been hit while seeking to exit the Persian Gulf. Both were transiting the waterway near Oman. Iran has said that vessels can only pass through a route that has been approved by authorities and sought to struck those that don't.

Trump also said on social media that the attacks were taking place, saying they are "in retaliation for the Iranians' failed attempt at adding sea mines to the Strait, which currently has no mines (They have been completely removed or detonated!), and the Iranians shooting eight missiles, all successfully knocked down, at our Military Base in Jordan."

"If the failed Nation of Iran retaliates for this very justified attack, they will be hit again at a much harder and higher level, but it will not be the biggest attack of them all, that is waiting in the wings and, when it is over, there will be very little left of the Islamic Republic of Iran!" Trump then warned.

Iran, however, vowed to retaliate. "Harsh punishment awaits the aggressors. The United States will regret its new attacks," a spokesman for the Iranian Revolutionary Guard Corps said, according to Iran International.

Shortly after the country launched attacks, with the IRGC saying they would "tighten the lock" on the Strait of Hormuz.

"Hours ago, in indiscriminate attacks born of desperation, the invading US military bombed several locations along Iran's southern coast, including several civilian sites," reads a passage of the statement.

"The IRGC's fighters have begun a response that will make the aggressors regret their actions," it added.