US stock indices rose on Friday as easing oil prices halted the surge in Treasury yields. The S&P 500 rose 0.5%, the Dow added 479 points, and the Nasdaq 100 gained 0.4%. Oil prices fell after news that the US and Iran moved closer to an agreement to lift naval blockades on tankers in the Persian Gulf and ease economic measures against Tehran. Benchmark borrowing costs halted their surge after reaching multi-decade highs. AI stocks were mixed. Hardware shares were mostly higher, with Applied Materials up 2.3% and Lam Research rising 2.6%. Among hyperscalers, Alphabet rose 0.6%, and Microsoft gained 3.7% after announcing plans to merge its consumer and workplace Copilot AI assistants into a product for corporate customers. Meta fell 3.3%, but surged around 12% on the week after a series of hardware releases following its Muse AI agent. Oracle lost 1.7%. Financials were mostly higher. During the week, the S&P 500 rose 0.6%, the Nasdaq 100 jumped 2.1%, and the Dow shed 103 points.

Crude oil eased to around $92 a barrel on Friday after Iran called on the US to return to an interim peace deal that failed to end the war over the summer. A sequenced agreement would resemble the memorandum of understanding reached by the US and Iran in mid-June, which led to a fragile ceasefire that collapsed weeks later. Iran’s foreign minister proposed reopening the Strait of Hormuz and resuming nuclear talks with the US within seven days if the Trump administration accepts its conditions, including lifting the naval blockade, unfreezing Iranian assets, and ending the war “on all fronts.” Oil flows through Hormuz reached 33.7 million barrels this week, putting exports roughly on track with the previous week’s levels. Oil markets have remained volatile this week amid mixed signals over peace prospects, signs of recovering Middle East energy flows, and speculation that the US could restrict diesel exports. Despite recent gains, the US oil benchmark is down around 7.4% on the week.

The potential for either diplomatic agreements or escalatory strikes between the US, Iran, and GCC states will remain in focus as high energy prices and resilient economic activity have lifted global bond yields to multi-decade highs. A busy week of economic data in the US includes the September jobs report, alongside FOMC consensus that the labor market remains at full employment. ISM PMIs, personal income and outlays, and PCE price indexes are also due. Meanwhile, the Eurozone and its main members will release inflation and unemployment figures into a market pricing in multiple rate hikes by the ECB this cycle. Elsewhere, PMIs are featured in a holiday-shortened week in China. Japan will publish industrial production, retail sales, and the Bank of Japan's quarterly Tankan survey, while trade data from South Korea could provide fresh catalysts the AI trade. Lastly, the Reserve Bank of Australia is scheduled to announce its interest rate decision.

The US 10-year Treasury yield hovered around 5.2% on Friday, near its highest level since mid-200. Traders refocused on hawkish comments from Fed officials, while a lack of concrete progress in US-Iran negotiations to end the conflict continued to fuel concerns about inflation. Meanwhile, the University of Michigan’s consumer sentiment survey confirmed a sharp rise in inflation expectations in September. Strong US economic data, worsening fiscal conditions and rising government debt have also weighed on the Treasury market. Adding to woes, efforts by Treasury Secretary Bessent to cap long-dated yields through increased Treasury buybacks are widely seen as having had limited impact. Investors currently expect the Fed to raise the federal funds rate by 25bps next month, with the probability of such a move standing at around 66%.

New orders for US-manufactured durable goods were largely flat month-over-month at $338.6 billion in August 2026, following two consecutive monthly increases and compared to market forecasts for a 0.4% decrease. Orders declined for transport equipment (-0.6%), namely nondefense aircraft and parts (-4.3%) and vehicles and parts (-0.6%), as well as fabricated metal products (-1.3%). Conversely, the biggest increases were seen for defense aircraft and parts (5.9%); computer and related products (1.5%); primary metals (1.2%); electrical equipment, appliances, and components (1.1%) and machinery (1.1%). Excluding transportation, durable goods orders went up by 0.3%, after a 0.7% increase in July and below the expected 0.6% gain. Meanwhile, orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, grew by 1.6%, after a 0.6% increase in July and overshooting market forecasts for a 0.5% advance.

The dollar index fell below 101 on Friday, pausing a five-session rally that had taken the greenback to July highs. A modest decline in oil prices, amid signs that US and Iranian negotiators may be exploring a phased agreement to reopen the Strait of Hormuz, provided some relief to investors concerned about inflationary pressures. Nevertheless, the dollar gained around 1% on the week, marking a second consecutive week of gains. The move was supported by expectations of further monetary policy tightening by the Fed, continued uncertainty in the Middle East, the sequential rise in oil prices, and resilient US economic activity. The greenback was mostly lower against the yen on Friday after Japanese authorities said Tokyo and Washington remain committed to the stance underpinning July’s joint interventions. Finance Minister Katayama also said that President Trump had expressed concerns about the yen during a meeting with Prime Minister Sanae Takaichi earlier this week.