(Updates with index/price moves and geopolitical news from the first paragraph.)
US equity indexes declined after the 10-year benchmark government bond yield hit a 19-year high and crude oil jumped as a Tehran-aligned militia group continues to pull Saudi Arabia into the Iran war.
The Nasdaq Composite fell 0.6% to 26,029.1, the S&P 500 declined 0.5% to 7,583.2, and the Dow Jones Industrial Average dropped 1% to 51,917.5 after midday Tuesday. All sectors except energy retreated. Consumer discretionary and communication services led decliners.
The Federal Reserve kicked off its two-day monetary policy meeting on Tuesday. Ahead of the Fed's announcements on Wednesday, interest rate traders are now pricing in a 93% probability that the central bank will raise its target rate by 25 basis points, up from 33% a month ago, according to the CME FedWatch tool.
Most US Treasury yields rose. The 10-year yield jumped 5.1 basis points to 5.01%, earlier touching 5.04%, the highest since 2007. The two-year yield advanced 3.1 basis points to 4.67%.
Yemen's Iran-aligned Houthis launched a new wave of attacks on Saudi Arabia and were digging into positions on the western coast of Yemen along the Red Sea, Yemeni officials said, as urgent deliberations took place in Riyadh over how to respond to their lightning advance, according to a Reuters news report.
Iran's semi-official Fars news agency reported that the Iran Revolutionary Guards Corps has shot down another US-developed MQ-1 drone over Hormuz, Al Jazeera, a Middle Eastern broadcaster, said. This is the third such drone downed in the area on Tuesday, the report said, citing the IRGC.
The front-month US West Texas Intermediate crude oil contract jumped 1.9% to $103.27 per barrel, and the global benchmark North Sea Brent rose 1.5% to $107.28 per barrel.