US equity futures retreated sharply on Friday after bond yields climbed to their highest level since early June 2025, driven by mounting evidence that the Iran war is beginning to inflict lasting economic damage.
The 10-year Treasury yield rose to 4.54% as investors priced in tighter monetary policy, while oil prices surged on fears that the closure of the Strait of Hormuz would constrain global crude supply.
The twin shocks of higher energy costs and rising borrowing costs erased the prior session’s record gains, with the S&P 500 and Nasdaq pulling back sharply.
5 things to know before Wall Street opens
1. The 10-year Treasury yield rose to 4.54% on Friday, its highest level since early June 2025, as the Iran war generated fresh inflation concerns.
Investors are pricing in a greater likelihood of tighter monetary policy, pushing global bond yields sharply higher.
The move rattled risk assets and dragged US equity futures well below Thursday’s record closing levels, leaving markets on the back foot heading into the weekend.
2.Brent crude futures rose 2.7% to $108.83 a barrel after the closure of the Strait of Hormuz, a critical shipping route for global oil supply, intensified fears of a protracted supply disruption.
Earlier in the week, Brent had fallen as much as 5.6% to $102.19, its lowest level this year, when markets assumed the Middle East conflict would be brief.
Those hopes have since faded, sending energy prices sharply higher.
3. Dow futures fell 300 points, or 0.6%, while S&P 500 futures dropped 1% and Nasdaq 100 futures slid 1.4%.
The declines erased gains from Thursday, when the S&P 500 and Nasdaq closed at record highs.
Rising bond yields and higher oil prices are weighing on sentiment, with technology stocks bearing the brunt as borrowing costs climb.
4. A two-day summit between the US and China concluded on Friday without a major breakthrough on trade or other key issues, though both sides signalled interest in broader economic cooperation.
The outcome adds another layer of pressure on already volatile global markets grappling with rising bond yields and higher energy prices.
The failure to reach a deal removes a potential diplomatic tailwind and threatens to deepen the selloff in risk assets, particularly technology shares that have driven recent equity gains.
5. Applied Materials issued third-quarter revenue and earnings guidance above Wall Street expectations, a positive signal for semiconductor equipment stocks.
However, the broader technology rally, fuelled by enthusiasm for artificial intelligence, faces growing headwinds.
Higher oil prices risk pushing inflation expectations up and lifting borrowing costs further, which could erode the premium investors have placed on high-growth technology companies.
Dexcom shares bucked the trend, rising 2% in premarket after the chief executive outlined governance improvements.
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