US equity indexes fell amid a surge in government bond yields and crude oil futures ahead of Friday's close as concern mounted over the timeline for the reopening of the Strait of Hormuz.
The Nasdaq Composite dropped 1.3% to 26,286.8, with the S&P 500 down 1.1% to 7,422.4 and the Dow Jones Industrial Average lower by 1% to 49,578.4.
A summit between US President Donald Trump and his Chinese counterpart, Xi Jinping, ended with mixed messages over the reopening of Hormuz, the Wall Street Journal reported. The waterway is the chokepoint to about a fifth of global crude oil flows, and the impact of its full or partial closure was evident in consumer and wholesale price inflation.
"The market could be pinning too much hope on the US-China talks yielding some positive results on Iran," ING Bank said in a note. "Some hope that China could exert pressure on Iran to reach a deal with the US, to end the war, and lead to a resumption of energy flows through the Strait of Hormuz."
Expectations that Hormuz will quickly return to normal maritime traffic levels in June are based on "magical thinking" and underestimate the political and operational barriers to restoring flows, RBC Capital Markets strategists said in a note.
US Treasury yields surged, with the 10-year up 13.8 basis points to 4.60%, the highest in about a year. The two-year advanced 8.9 basis points to 4.08%, the strongest level since February 2025.
West Texas Intermediate crude oil futures surged 4.2% to $105.43, and Brent crude futures jumped 3.4% to $109.34.