US Indexes Stay Elevated Amid Escalating Stagflation Risks

Barry Adams
18 May, 2026
New York City

The ongoing conflict in the Middle East dominated market sentiment on Monday, following the record-setting week. 

The S&P 500 index decreased 0.1%, the tech-heavy Nasdaq Composite declined 0.2%, and the yield on 10-year U.S. treasury notes inched higher to 4.59%. 

Stocks hovered near record highs, but the yields on the U.S. Treasury notes edged higher as the stalled peace process between the U.S. and Iran confirmed the prolonged suspension of energy products through the Strait of Hormuz. 

Moreover, last week's inflation reports in the U.S., China, Japan and India confirmed that inflationary pressures are building, and higher energy prices have started to ripple through the economy. 

Last week, global markets extended the previous week's gains, and benchmark indexes in the U.S. advanced for the seventh consecutive week. 

The US-China summit statements underwhelmed investors and confirmed that China is not likely to stop selling high-tech defense technology to Russia and Iran. 

Global stagflation risks are rising amid tighter global supply of energy products, higher prices of crude oil and natural gas, and sky-high U.S. federal government debt. 

Crude oil and natural gas extended last week's 20% gains amid little progress between Iran and the U.S.; however, after the first of trading, prices eased about 1%.

Higher oil prices are causing significant disruptions to the economies of Japan, India, South Korea, and other smaller nations in Asia. 

Moreover, supply disruptions in the Persian Gulf are forcing Gulf nations to sell their U.S. Treasury notes holdings and seek help from the U.S. Federal Reserve. 

Benchmark indexes in France, Germany, and the U.K. advanced more than 0.5%, but they fell more than 1% in Australia, Hong Kong, and Japan and edged 0.1% higher in India.