Stocks slip, oil rallies and bond yields rise as Gulf conflict escalates

By Sinéad Carew and Stefano Rebaudo

July 13 (Reuters) - Stocks fell and oil prices rallied on Monday, while government bond yields rose, after U.S. and Iranian forces renewed exchanges of heavy missile and drone assaults, with Tehran saying it had again closed the vital Strait of Hormuz.

Oil added to its gains after President Donald Trump responded with an announcement that the U.S. was reinstating a naval blockade on Iran, and would be reimbursed 20% on all cargo shipped through the strait.

"The trading of bombs between the United States and Iran is front and center. That's why you're seeing energy prices rally. It's more of the same uncertainty surrounding where the Middle East stands. What's going to resolve it and when is it going to be resolved?" said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.

On Wall Street at 11:43 a.m. ET (1543 GMT), the Dow Jones Industrial Average fell 106.72 points, or 0.20%, to 52,530.29, the S&P 500 was down 30.60 points, or 0.40%, to 7,544.79 and the Nasdaq Composite fell 247.59 points, or 0.94%, to 26,034.83.

The technology sector was adding pressure to indexes as investors sold off stocks related to artificial intelligence and particularly in semiconductors. Included in the selloff were U.S.-listed shares of SK Hynix, which fell 8.5% on Monday after rallying sharply on their Nasdaq debut on Friday.

South Korea's KOSPI sank nearly 9%, after already losing more than 7% last week, as bets on semiconductor shares came under pressure. The market has emerged as a key global barometer for chip-sector sentiment and further losses could ripple out more broadly.

MSCI's gauge of stocks across the globe was down 6.80 points, or 0.60%, at 1,119.74. The pan-European STOXX 600 index fell 0.06%.

Meanwhile, U.S. Treasury yields rose as intensifying hostilities between the U.S. and Iran fanned concerns about inflation pressures and their impact on Federal Reserve monetary policy.

The yield on benchmark U.S. 10-year notes rose 2.85 basis points to 4.598%, from 4.569% late on Friday while the 30-year bond yield  rose 2.17 basis points to 5.0927%.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 3.99 basis points to 4.248%, after hitting its highest levels since February 2025.

The U.S. dollar inched up as traders monitored geopolitics and how it might affect the rate outlook, just a day before the release of key U.S. inflation data.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.06% to 101.12, with the euro down 0.11% at $1.14.

Against the Japanese yen, the dollar strengthened 0.4% to 162.33.

Sterling weakened 0.2% to $1.3378 at the start of a pivotal week in British politics as Andy Burnham is expected to be formally anointed as Labour leader on Friday and be officially named as UK prime minister on July 20.

In energy markets, oil prices rose more than 4% on Monday after Trump's comments reignited concerns over energy shipments.

U.S. crude rose 4.47% to $74.60 a barrel and Brent rose to $79.36 per barrel, up 4.41% on the day.

(Reporting by Sinéad Carew, Stefano Rebaudo; Editing by Helen Popper, Chizu Nomiyama and Susan Fenton)