US equity indexes fell after the 30-year Treasury yield hit its highest in just under two decades, while bets favoring interest rate increases jumped amid President Donald Trump's threat to resume strikes if Iran fails to reach a peace deal.
The Nasdaq Composite fell 0.3% to 26,025.7, with the S&P 500 down 0.2% to 7,390.5 and the Dow Jones Industrial Average lower by 0.2% to 49,579.2 in midday trading on Tuesday.
President Trump warned strikes would resume on Iran in the coming days as part of the push for a deal to end the war, after he said he had just called off a US attack, Bloomberg reported.
"I hope we don't have to do the war, but we may have to give them another big hit," Trump told reporters on Tuesday, referring to talks between the Gulf nations and Tehran to agree on a framework for resuming peace negotiations.
When asked how long he would wait, he said: "Well, I mean, I'm saying two or three days, maybe Friday, Saturday, Sunday. Something maybe early next week - a limited period of time."
The North Atlantic Treaty Organization is considering helping ships pass through the Strait of Hormuz if it doesn't get unblocked by early July, Bloomberg reported, citing a senior official in the military alliance. Several members of NATO support the idea, but it doesn't have the necessary unanimous support, the report said, citing a diplomat from a NATO country.
US Treasury Secretary Scott Bessent called on world leaders at a G7 conference to help the US fight Iranian terrorism by "rooting out the financing that sustains it," CNBC reported.
West Texas Intermediate crude oil futures rose 0.1% to $108.80, while Brent crude futures fell 1% to $111.03.
US Treasury yields traded mixed, but elevated, as crude oil supply-shock-driven inflationary concerns boosted bets for interest rate increases from September onwards. The 30-year rate rose 2.2 basis points to 5.17%, the strongest level since 2007. The 10-year climbed three basis points to 4.65%, the highest since January 2025.
The probability of a 25 basis-point increase in US interest rates in December was at 40% from 1% a month ago, according to the CME FedWatch tool midday Tuesday. The comparisons for September and October show a similar jump in rate-increase probabilities.
In precious metals, gold futures fell 1% to $4,510.2, and silver futures dropped 3% to $75.11.
In economic news, Redbook US same-store sales rose by 8.1% from a year earlier in the week ended May 16 after a 9.6% year-over-year increase in the previous week.
"Coming off last-minute Mother's Day shopping on Sunday, sales and traffic slowed across the board in the middle of the week, but picked up during the weekend as graduation, BBQ season, and warm weather approached," Redbook noted.
US pending home sales increased more than expected last month as home buyers apparently shrugged off mounting economic uncertainty. The forward-looking indicator of home sales based on contract signings increased 1.4% month over month in April, the National Association of Realtors said. Analysts expected a 1% gain, according to a Bloomberg-compiled survey.