In response to market anxiety over the Middle East war and the highest weekly increase in 10-year Treasury rates in 18 months, stocks declined on Thursday, ahead of comments from Federal Reserve Chair Jerome Powell and a busy earnings day.

Investors are juggling two opposing market themes: the prospect of historically high interest rates and the possibility of a war that may completely alter world geopolitics. The 10-year Treasury yield has reached about 5%, the highest level in 16 years, while equities have suffered due to the Fed’s potential for no rate reduction anytime soon.

At the same time, investors have chosen to purchase gold at its highest level in two months rather than bonds as a safe-haven investment. The third-quarter earnings season has added to the number of moving factors. The world’s most sophisticated semiconductor manufacturer, TSMC, Philip Morris (PM.N), Blackstone (BX.N), and Fifth Third Bancorp, will all release their financial results on Thursday.

The MSCI All-World index of international shares (.MIWD00000PUS) was down 0.25% on the day due to weakness in Asian equities markets and a 0.9% decline in Europe’s STOXX 600 (.STOXX). The yield on the benchmark 10-year note increased by six basis points to 4.962% as prices for U.S. Treasuries declined for a fourth day. This placed the yield on track for a weekly jump of 34 bps, the largest one-week gain since April 2022.

Bonds are often a top option for investors looking for safe-haven assets, but right now, other dynamics are at play, as interest rates are increasing and a flood of debt issuance is expected to reach the market in the coming weeks. Head of Pictet Wealth Management’s macroeconomic research, Frederik Ducrozet, stated

We will monitor the development of this geopolitical crisis. Bond rates are not the primary factor driving the market today; the risk premium manifests more in other assets, such as gold and the U.S. currency. It’s ‘higher for longer’ and very much a case of supply and demand, he added.

“This tells you a lot about how different the situation is today, when even the risk of regional, if not global, conflict does not help U.S. Treasuries,” he stated.

Futures for U.S. stock indexes decreased by about 0.2%. Shares of the most expensive automaker in the world, Tesla (TSLA.O), saw a 4.6% decline in pre-market trading after disclosing a decline in third-quarter gross margins. In contrast, Netflix (NFLX.O) shares increased by around 13% due to a surge in member numbers in numerous important areas over the three months leading up to September.

However, Powell’s address on the economic outlook before the Economic Club of New York later in the day will be the key event for markets that day.

According to a Reuters poll of economists, the Fed will hold interest rates constant when it meets on November 1, and an increasing percentage of them predict no rate reduction until the second half of 2024. According to Shane Oliver, head of investment strategy and chief economist at AMP in Sydney, “He (Powell) will hedge his bets in this environment,” saying that the central bank governor would probably support the higher for longer stance.

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The Japanese yen, another traditional haven currency, remained close to one-year lows at 149.82 per dollar. In contrast, the dollar index, which compares the dollar value to six other currencies, was unchanged on the day.

Near two-month highs, gold was up 0.24% at $1,952 an ounce. In the two weeks following the murderous spree in Israel by the Palestinian militant group Hamas, anxiety over the situation in the Middle East has driven gold up by 8%.

During a brief visit on Wednesday, Vice President Joe Biden of the United States vowed to support Israel and the Palestinians.

Following an explosion at Gaza’s Al-Ahli al-Arabi hospital late on Tuesday, which Palestinian sources claimed killed 471 people and was caused by an Israeli air strike, the area remained tense. Israel and the U.S. claimed that a botched missile launch by Islamist militants in Gaza, who disputed involvement, was the cause of the incident.

The Organization of Petroleum Exporting Countries (OPEC) gave no indications that it would support Iran’s proposal for an oil embargo on Israel. At the same time, the United States announced plans to relax sanctions against Venezuela to enable more crude to flow internationally. As a result, oil plummeted on Thursday.

Crude futures have had a difficult few weeks, going from as low as $83 to as high as $93 per barrel.

Until now, according to an indicator of oil volatility (.OVX), October has been the most volatile trading month for oil since November 2021.

Most global oil trading is based on Brent crude futures, which recently traded 0.6% down at $90.96 per barrel after rising 2% the previous day. At $88.16, U.S. crude futures were down 0.2%.