US stocks fall as oil and Treasury yields rise

US stocks closed lower Monday as higher oil prices and a rise in long-term US Treasury yields weighed on equities while investors watched stalled US-Iran diplomacy over the Strait of Hormuz.

The S&P 500 fell 0.5% to 7,745.06, the Dow Jones Industrial Average lost 0.5% to 53,459.78 and the Nasdaq Composite dropped 0.3% to 26,644.91.

Oil added to recent gains as the United States and Iran showed no sign of reaching a deal to reopen the Strait of Hormuz after nearly six months of war. Brent North Sea crude rose 2.7% to $90.87 a barrel, while West Texas Intermediate rose 2.6% to $84.50.

The yield on the 30-year US Treasury bond climbed to 5.31%, described as its highest level since June 2007. Analysts said higher oil prices and bond yields reduced appetite for risk.

“The ongoing diplomatic gridlock between Washington and Tehran over transit through the Strait of Hormuz has kept crude prices elevated,” said David Morrison, an analyst at Trade Nation.

Briefing.com analyst Patrick O'Hare said the moves in oil and interest rates were a “headwind” for stocks and meant “a little bit less risk-taking” in the session.

European markets also closed lower, with London’s FTSE 100 down 0.3%, Paris’s CAC 40 down 0.7% and Frankfurt’s DAX down 0.4%.

A European Central Bank paper warned that a correction in US artificial intelligence-related stock valuations could affect Europe. “A US AI fallout would not remain a US problem,” the ECB said.

Investors were also looking ahead to earnings from Walmart, Home Depot and Target for signs of US consumer strength after recent data pointed to a weaker labour market and slower consumer spending.

In Asia, Hong Kong’s Hang Seng Index rose 1.3%, Shanghai gained 1.4% and Tokyo advanced 0.7%, while Seoul was closed for a holiday.