ASX set to slide, Wall Street declines as oil rises on escalating Middle East tensions

Stan ChoeUpdated August 21, 2026 — 6:12am,first published 5:17amA rise in oil prices is sending worries about inflation and yields in the bond market higher, erasing some of the relief the US Treasury Department had created a day earlier. The higher yields and a big drop for Walmart helped to drag the US sharemarket lower.The S&P 500 fell 0.9 per cent for its fourth loss in the five days since setting its record last week. The Dow Jones Industrial Average fell 1.3 per cent, and the Nasdaq composite sank 1 per cent. Treasury yields climbed after the price of Brent crude rose 2.4 per cent following US President Donald Trump’s latest threat to Iran.Wall Street closed in the red for the fourth time in five days.BloombergThe Australian sharemarket is set to decline, with futures at 4.55am AEST pointing to a fall of 23 points, or 0.3 per cent, at the open. The ASX added 0.3 per cent on Thursday. The Australian dollar was trading at US71.10¢. Guzman y Gomez and Inghams are among the companies scheduled to report earnings today.The bond market remains the centre of the action after yields charged higher through the northern summer on worries about high inflation, gargantuan government debts and other factors. US Treasury Secretary Scott Bessent made a move that jolted financial markets to at least double the size of his department’s planned purchases of longer-term Treasurys from September 9 to November 4.That helped to push yields down after the 10-year Treasury’s yield had hit its highest level in more than a year, and the 30-year yield got back to where it was in 2007, before the Great Recession sent yields towards zero worldwide. It’s a big deal because high yields slow the economy by raising interest payments for people, companies and the government, and they can undercut prices for shares and other investments.But analysts had cautioned the effect may be short-lived, given how small the purchases are relative to the overall size of the Treasury market and how they don’t fix the fundamental concerns of investors that had driven up yields in the first place. Plus, more signals arrived quickly to push worries higher.The US government’s debt topped $US40 trillion ($56.2 trillion) on Wednesday, a staggering record that arrived months after the national debt first blew past the $US39 trillion mark in April, because Washington continues to spend far more money than it brings in.And on Thursday, the price for a barrel of Brent crude rose 2 per cent to $US93.41 as uncertainty continues about when the war with Iran will allow oil tankers to freely exit the Persian Gulf again. Trump threatened Iran with “the MOST CRUSHING ECONOMIC OPERATION EVER TAKEN AGAINST ANY COUNTRY” late on Wednesday, but provided few details.That helped to push the 10-year Treasury yield up to 4.70 per cent from 4.65 per cent late on Wednesday. It’s almost back to its 4.71 per cent level from late Tuesday, before the Treasury Department made its announcement.A couple of encouraging reports on the US economy also helped to push up longer-term Treasury yields, which move with expectations for the economy and inflation in coming years. One said that fewer US workers applied for unemployment benefits last week than economists had expected, while another said that manufacturing in the mid-Atlantic region appears to be much stronger than expected.On Wall Street, Walmart was one of the heaviest weights on the S&P 500 and fell 9.2 per cent even though it reported stronger profit and revenue for the latest quarter than analysts had expected. Investors focused instead on how an important underlying measure of revenue growth at its stores slowed once more. Its forecast for profit in the current quarter also fell short of analysts’ expectations.Given its massive size, Walmart offers a look at how shoppers are doing across the United States. A surprisingly weak update on sales at US retailers overall last month had raised worries that shoppers may be succumbing to pressure from high inflation and a jobs market that may be looking less solid.Advance Auto Parts tumbled 24.6 per cent after the retailer reported weaker revenue for the latest quarter, even though its profit topped expectations. Chief executive Shane O’Kelly said that “tighter household budgets constrained spending more than we anticipated, especially during the last four weeks of the quarter”.Spending by US consumers is the main engine of the economy, and a pullback by them could exacerbate what’s already a slowdown in growth for the economy.A pullback could also mean a double-whammy for travel companies, which would see fewer bookings when they have to pay higher prices for fuel. Norwegian Cruise Line Holdings fell 3.4 per cent, while United Airlines sank 3.5 per cent and American Airlines lost 2.5 per cent.Helping to keep Wall Street’s losses in check was Deere, which reported stronger profit and revenue for the latest quarter than analysts had expected. It rose 6.9 per cent as the company said order trends indicate the agriculture equipment business looks set to accelerate after this year.Oil companies also rose with the gains for crude prices. Exxon Mobil added 0.8 per cent while ConocoPhillips climbed 3.3 per cent.In sharemarkets abroad, indexes were mixed in Europe following a stronger finish in Asia.South Korea’s Kospi soared 5.9 per cent for one of the world’s biggest moves after the two tech titans that dominate its market, Samsung Electronics and SK Hynix, jumped. Such swings have become more common for Seoul’s market, which has borne the brunt of rising and falling worries that winning stocks in the artificial-intelligence boom may have shot too high.APThe Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.From our partners