September began with turbulence in global financial markets. Wall Street started in decline, with the S&P 500 falling 0.71% to 7,631.47 points, the Dow Jones losing 0.79% to 52,766.88 points and the Nasdaq Composite dropping 1.03% to 26,099.77 points. Simultaneously, sovereign debt yields soared to historic levels, with the US 10-year yield reaching 4.798%, the highest value since January 2025, and the German 10-year yield reaching 3.35%, a high since 2011.
Oil again became the thermometer of geopolitics, with WTI crude rising 5.2% to $90.22 and Brent advancing 4.59% to $94.65, after the United States launched a new wave of attacks against targets in Iran. Iran responded militarily, targeting American bases and interests in the Middle East, further driving up crude prices. The geopolitical context in the Middle East shows no respite, while global sovereign debt yields are at their highest value since 2008.
The rise in yields is pressuring both Wall Street and European stock exchanges, in a scenario described as a bond bear market. The market is already pricing 68.2% probability of a 25 basis point hike by the Fed in September, up from 39.6% a week ago, after Kevin Warsh's hawkish speech at Jackson Hole. In Europe, eurozone inflation data above 3% in August cemented the bets on a rate hike by the ECB also in September. Nonetheless, data showing a slowdown in US industrial activity and job openings below expectations in July brought some relief to investors.
In European geopolitics, the conflict between Ukraine and Russia intensified, with Putin announcing that Russia annexed 270 square kilometers of land and 15 settlements in Donetsk, plus 9 settlements in Zaporizhzhia in August. Zelensky threatened to attack airline companies flying over Russia with drones, which Putin called "state terrorism." Germany announced the closure of the Russian consulate in Bonn and the Russian cultural center in Berlin, after holding Moscow responsible for drone incidents at Leipzig airport, with Russia promising an "appropriate response."
