Global stocks fell on Wednesday as renewed U.S.-Iran fighting pushed crude prices to five-week highs, intensifying inflation fears and adding to pressure on government bond markets already facing the prospect of higher interest rates.

The United States struck Iranian military targets near the Strait of Hormuz, while Tehran said it had attacked U.S. assets elsewhere in the region. The exchange marked the most significant direct escalation between the two sides in weeks and renewed concerns that the conflict could disrupt one of the world’s most important energy corridors.

Brent crude futures rose to $94.87 a barrel, keeping oil close to levels that could materially complicate the inflation outlook for major economies. Any prolonged disruption around the Strait of Hormuz would pose a greater threat because the waterway carries a substantial share of global oil and liquefied natural gas shipments.

“The recent increase in energy prices has put additional upward pressure on bond yields, which had already been on the rise on the back of some fiscal concerns,” said Kiran Ganesh, a multi-asset strategist at UBS Global Wealth Management.

The benchmark U.S. 10-year Treasury yield climbed to an intraday high of 4.8122%, its highest level in almost three years. Japan’s 10-year government bond yield remained above 3% for a second consecutive session after reaching a three-decade high earlier in the week.

The simultaneous rise in oil prices and bond yields is particularly damaging for risk assets. Higher energy costs can feed directly into headline inflation and corporate expenses, while higher government borrowing costs increase the discount rate investors use to value stocks. That combination can squeeze equity valuations even before weaker economic growth becomes visible in company earnings.

MSCI’s gauge of global equities fell 0.2% to hover near a one-month low, while the pan-European STOXX 600 declined 0.3%. Asian markets suffered heavier losses following Wall Street’s overnight selloff, with South Korea’s KOSPI falling almost 4% and Japan’s Nikkei 225 dropping 2.9%.

U.S. stock futures pointed to a muted opening.

The market reaction is also being amplified by changing expectations for the Federal Reserve. Investors entered September already reassessing the U.S. interest-rate outlook following hawkish comments from Fed Chair Kevin Warsh, who warned that the central bank still needed to ensure inflation was moving convincingly toward its 2% target.

The latest oil shock has complicated that decision. A sustained rise in crude prices could lift inflation while simultaneously weakening household purchasing power and corporate margins. For the Fed, that creates a difficult policy trade-off: tighter monetary policy could contain second-round inflation effects but further slow economic activity.

Investors are therefore turning to U.S. economic data for evidence of whether the economy remains strong enough to withstand another rate increase.

ADP private-sector employment data is due Wednesday, followed by the closely watched nonfarm payrolls report on Friday, ahead of the Fed’s Sept. 16 policy meeting.

Fed funds futures were pricing a 68% probability of a 25-basis-point rate increase in September, up sharply from 37% a week earlier, according to CME Group’s FedWatch tool.

The repricing has also supported the dollar, although analysts see limits to further gains after its recent rally.

The dollar index rose around 0.1% to 99.76 after touching 99.808, its highest level since Aug. 17. The euro fell 0.16% to $1.1575, while the greenback initially moved toward ¥160 against the Japanese currency before the yen strengthened.

Rising yields tend to support the U.S. dollar by boosting its appeal as a safe-haven asset, while reducing demand for equities and other riskier investments; the market dynamic has shown as investors seek protection from the combination of geopolitical and inflation risks.

Ganesh said that because markets were already pricing a relatively hawkish Federal Reserve outlook, the dollar could have more room for downside surprises than some other major currencies if incoming U.S. data fails to support further tightening.

The yen remains vulnerable as markets assess the Bank of Japan’s willingness to raise interest rates. The currency strengthened 0.45% to ¥159.50 per dollar after earlier weakening toward the psychologically important ¥160 level.

BOJ Governor Kazuo Ueda said consecutive rate increases remained a possibility, while U.S. Treasury Secretary Scott Bessent expressed strong support for “decisive” monetary action to address yen weakness during a meeting with Ueda, according to the U.S. Treasury Department.

The comments come after a rare coordinated U.S.-Japan intervention at the end of July temporarily strengthened the yen and pulled it away from its 40-year low of ¥163.99. The currency has since given back roughly half of those gains.

Markets are becoming more reluctant to expect another intervention while oil prices remain elevated.

“There appears little chance of another round of actual coordinated intervention until there is some de-escalation in the Strait of Hormuz that takes heat out of the oil price,” said Tony Sycamore, a market analyst at IG.

The currency moves underline a broader shift in global markets: the Middle East conflict is no longer being treated solely as a geopolitical risk but as a monetary-policy and fiscal risk.

Higher oil prices threaten to prolong inflation, potentially keeping central banks restrictive for longer. At the same time, higher yields increase governments’ debt-servicing costs just as many advanced economies are already running large fiscal deficits.

That dynamic has become an issue for the United States, where long-term Treasury yields have been climbing even as investors debate the timing of the next Fed move. The rise in yields also raises the financing cost for companies and can put additional pressure on highly valued technology and AI stocks whose valuations depend heavily on future cash flows.

Other markets also moved lower. Gold declined 0.1% to $4,322.24 an ounce, while bitcoin fell 0.6% to $76,951 and ether dropped 1% to $2,394.57.

New Zealand’s dollar fell 1.2% to $0.58220 after the Reserve Bank of New Zealand raised its policy rate by 25 basis points to 2.75%, as expected. The currency weakened after the central bank used more hawkish language in its policy statement.

Analysts say the immediate direction of global markets will depend heavily on whether the Iran conflict expands and whether oil prices remain near or above $95 a barrel. If the energy shock persists, investors may face a combination of higher inflation, delayed rate cuts, elevated bond yields and weaker equity valuations, making September a potentially volatile month across global asset classes.

Meta has disabled the camera functions on thousands of its AI-powered glasses after detecting that users were physically tampering with the devices’ recording indicator lights, in an escalation of the company’s efforts to prevent people from secretly recording others in public.

The company confirmed on Tuesday that it had shut down the cameras on a small number of devices following a software update designed to detect attempts to circumvent the glasses’ privacy safeguards. Meta said the affected devices represented less than 0.1% of all Meta AI glasses sold.

Meta has not disclosed total lifetime sales of the glasses, which it launched in 2021. However, the company sold about 7 million pairs in 2025 alone, meaning an affected rate of 0.1% would translate to roughly 7,000 devices based on that year’s sales.

The enforcement action, first reported by Semafor, highlights a growing privacy challenge for wearable cameras: unlike smartphones, glasses can capture images from roughly eye level while appearing to the people around the wearer like an ordinary pair of eyewear.

Meta has long equipped its glasses with a small LED that illuminates when the camera is recording, providing a visible signal to bystanders. But some users have drilled out, covered, or otherwise interfered with the indicator, allowing them to record without the normal visual warning.

The issue has become contentious as Meta’s glasses have gained popularity. Critics have derisively referred to them as “pervert glasses”, while reports have documented attempts to use footage recorded with the devices to harass or embarrass people in public.

The controversy has forced Meta to defend not only the technology but also the privacy architecture built around it.

Meta CTO Andrew Bosworth said Monday in an Instagram question-and-answer post that the glasses were “the most privacy-forward camera” available to consumers.

“You haven’t had a camera that put a light on when it took a photo or video of somebody since you had like a VHS tape recorder in the 90s,” Bosworth said, pointing to the recording indicator.

He contrasted the feature with smartphones, which generally do not provide bystanders with a comparable external signal when their cameras are being used.

Meta has also launched a public-relations campaign to reinforce the privacy message. Billboards in Los Angeles describe the glasses as “designed for everyone” and “not just the people wearing them.”

But the company’s response goes beyond advertising.

A previous software update was designed to prevent recording when the indicator light had been tampered with. Users, however, discovered a loophole: the system checked for interference only when recording began. A person could therefore start recording normally, wait several seconds, and then cover the light without immediately triggering the restriction.

Meta’s latest update is designed to close that loophole by continuing to monitor the indicator during recording.

The consequences depend on how the indicator was disabled. Users who physically drilled out the LED will permanently lose camera functionality, according to Meta. Those who simply covered the light with a removable sticker can regain camera functionality after removing the obstruction.

Meta’s vice president of wearables, Alex Himel, said in a Thursday Threads post that only a “tiny minority of people” were attempting to tamper with the hardware. He said Meta would continue releasing software updates to ensure the recording LED can “reliably alert bystanders when photos or videos are being captured.”

The distinction between hardware tampering and temporary obstruction is important for Meta because the company is trying to preserve the glasses’ usefulness while establishing a credible privacy boundary. Permanently disabling cameras on modified devices may deter deliberate circumvention, but it also creates a more aggressive enforcement model than simply warning users or restricting individual recording sessions.

The broader issue is becoming more important as AI glasses evolve from novelty devices into mainstream consumer electronics. Meta’s glasses can capture photos and video hands-free, while AI capabilities allow users to interact with digital assistants and process information without reaching for a phone.

That convenience also changes the privacy equation. A smartphone being raised to eye level is usually an obvious indication that someone may be taking a picture. A camera embedded in glasses can be much less conspicuous, making the recording indicator one of the few mechanisms available to people nearby.

The challenge for Meta is therefore not simply preventing users from disabling a light. It is maintaining public trust in a category of devices designed to make cameras less visible and easier to operate.

The latest software intervention shows the company is prepared to treat attempts to circumvent that safeguard as a violation serious enough to result in loss of camera functionality. As wearable cameras become more common, the effectiveness of such safeguards could become a defining factor in consumers’ and regulators’ acceptability of them as ordinary consumer technology rather than intrusive surveillance devices.