Semiconductor Stocks Lead Decline in US Technology Sector
On August 18, US equity markets retreated, weighed down by climbing long-term Treasury yields, sustained high oil prices, and a correction in the semiconductor sector. The S&P 500 index fell about 0.7%, while the Nasdaq Composite dropped over 1.2%, largely due to a sharp selloff in chip makers. The PHLX Semiconductor Index plunged nearly 5%, with several prominent semiconductor and memory companies seeing share prices drop between 7% and 9%. Investor sentiment shifted as expectations around technology sector profits—particularly in AI-related companies—were recalibrated, triggering profit-taking on previously elevated valuations.
Record-High Long-Term US Treasury Yields Exert Pressure on Asset Valuations
In the bond market, the yield on the 10-year US Treasury rose to a range of 4.70%–4.74%, and the 30-year yield briefly hit 5.32%–5.33%, its highest since 2007, before settling near 5.28%–5.30% at close. The surge in long-term yields increases mortgage rates and corporate borrowing costs, placing downward pressure on risk asset valuations. Investors are reconsidering their portfolio allocations amid concerns over supply-demand imbalances in Treasuries and the large US budget deficit reported for July, fueling uncertainty about fiscal sustainability.
Strait of Hormuz Tensions Keep Oil Prices Elevated
Geopolitical tensions centered on disruptions to shipping through the Strait of Hormuz have kept oil prices elevated, with West Texas Intermediate (WTI) crude steady between $84 and $85 per barrel, and Brent crude above $90. The strait facilitates about 20% of global oil shipments, and any interference rapidly drives up prices, adding to inflationary concerns worldwide. Failure by the US and Iran to renew the prior 60-day Memorandum of Understanding led to fluctuating maritime traffic volumes, intensifying geopolitical risk premiums in oil. Meanwhile, US diesel refining margins reached record highs, spotlighting tightness in diesel supply chains.
UAE Halts Trade and Financial Transactions with Iran
Afra Al Hameli, spokesperson for the UAE Ministry of Foreign Affairs, announced an immediate suspension of all trade and financial dealings with Iran until further notice. This decision, linked to rising regional security threats, complicates Iran’s access to foreign currency and imports amid ongoing sanctions, increasing economic strain. The UAE’s move signals Gulf states’ reassessment of commercial risks amid escalating geopolitical instability.
Limited Response From Traditional Safe Havens and Cryptocurrencies
During this market volatility, traditional safe-haven assets like gold and silver showed muted reactions, with spot gold hovering around $4,300 per ounce and silver between $63 and $64. Rising Treasury yields raise the opportunity cost of holding non-yielding metals, offsetting some demand for their safety appeal. Cryptocurrencies such as Bitcoin remained stable within a $64,200–$65,000 range without mounting a sustained geopolitical risk-driven rally, staying far below its $126,000 peak in October 2025. This divergence marks a break from the usual correlation between digital assets and equity markets in short-term market stress.
Market Focus Shifts to Strait of Hormuz Negotiations and Fed Policy
Market direction hinges on whether negotiations around maritime traffic through the Strait of Hormuz yield a durable agreement, and how UAE’s trade suspension modifies regional economic and financial dynamics. Against the backdrop of high interest rates, expensive energy, and ongoing geopolitical risks, investors are increasingly focused on the resultant economic impact. Upcoming Federal Reserve guidance is being closely watched to gauge potential shifts in monetary policy and their ramifications across key asset classes.