GLOBAL MARKETS-Global stocks retreat and bonds wilt as oil climbs

Mon, 18th May 2026 10:00

* STOXX 600 skids, S&P futures down ahead of Nvidia results

* Oil prices gain on reports of drone ⁠attacks in Gulf

* Mounting inflation concerns keep bonds on the ropes

LONDON, May 18 (Reuters) - Global share markets slipped on Monday as fresh drone attacks in the Gulf shoved oil prices and bond yields higher, stoking inflation worries in a week when the tech bull run will be tested by ‌earnings from Nvidia. A drone strike caused a fire at a nuclear power plant in the United Arab Emirates, while Saudi Arabia reported intercepting three drones, as U.S. President Donald Trump warned that Iran must act "fast" to reach a ⁠deal.

Meanwhile, the vital Strait of Hormuz remains closed to all but a trickle of shipping as Tehran ⁠tries to formalise its control of the waterway that during normal times carries 20% of the world's oil and gas trade.

"Right now, markets are panicking as they are pricing the possibility that the Strait of Hormuz remains closed," said George Lagarias, chief economist at Forvis Mazars.

Brent was trading up 1% at about $110.50 a barrel, while U.S. crude climbed 1.2% to $106.72 a barrel. Crucially, futures for September climbed above $100 and December hit a contract high as markets braced for protracted shortages.

G7 finance ministers are scheduled to ‌gather in Paris on Monday to discuss the Strait of Hormuz and critical raw material supplies, though geopolitical differences threaten to test the group's cohesion.

Global bond markets were hit again on Monday by concerns that energy costs would stay high and thus continue to drive inflation.

Yields on U.S. 10-year notes hit a 15-month top of 4.631%, having surged 23 basis points last week. Yields on 30-year bonds reached 5.159% after jumping 18 basis points last week.

Japan's 10-year yield hit a peak not seen since 1996 as the government proposed to issue fresh debt to fund a planned extra budget to cushion the economic blow from the Iran war. Germany's 10-year bond yield rose to a level not seen in 15 years.

"As long as this is not a credit event, and we have no evidence to ‌call this a credit event, then beyond the normal volatility seen for a market at all-time highs, I would be surprised if it causes a big rout in equities as well," Forvis Mazars' Lagarias said.

"It can be an excuse for some investors to take some ‌money off the table, but I'd be surprised if we saw a proper correction on the back of this bond volatility."

STOCKS SKID

European stocks fell 0.5%, with major markets in Frankfurt, Paris and London flat to down 1.1%. Overnight, Japan's Nikkei eased 1%, having fallen 2% last week from record highs. South Korean stocks rose 0.3%, as Samsung Electronics gained almost 4% after a court issued a partial injunction against a union strike. MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.7%. Chinese blue chips lost 0.6%, as economic data disappointed. China's April retail sales edged up 0.2% when analysts had looked for growth of 2.0%, while industrial output ‌rose a sluggish 4.1%.

S&P 500 futures fell 0.4% and Nasdaq futures lost 0.2%.

AI, RETAIL EARNINGS TO TEST THE BULL RUN

Rising yields push up borrowing costs and mean a higher discount for future company earnings, challenging stock valuations.

The AI trade will be tested by earnings from Nvidia that are due on Wednesday, with expectations sky-high for the world's most valuable company.

Nvidia shares are up 36% since a March low, ⁠while the Philadelphia SE ⁠semiconductor index has surged more than 60%, amid voracious demand for chips as tech companies spend massively to build AI-related infrastructure.

Also due ‌this week are results from a host of retailers led by Walmart, which will provide an insight into how consumers are faring with high energy prices.

In forex markets, risk aversion has tended to benefit the greenback as the world's most liquid currency. The U.S. is also a net energy exporter, giving it a relative advantage over Europe and much of Asia. The euro was little changed at $1.1630 after losing 1.4% last week. The ‌pound was steady at $1.3353, having dived 2.3% last week as political instability in Britain added to already intense pressure on the gilt market.

The dollar held firm against the yen at 158.91, with only the threat of Japanese intervention preventing another speculative assault on the 160.00 chart barrier.

In commodity markets, gold was near flat at $4,544 an ounce , having drawn little support so far as a safe haven or as a hedge against inflation risks. (Reporting by Samuel Indyk and Wayne Cole; Editing by Gus Trompiz and Sonali Desai)