The primary catalyst for this aggressive risk-off rotation was an escalation in Middle Eastern geopolitics. Fresh threats to the fragile US-Iran ceasefire, alongside reports of launched or attempted retaliatory strikes, sent shockwaves through risk assets.
This geopolitical premium immediately bid up the energy complex, with both WTI and Brent crude jumping by around2%.
Adding fuel to the fire, the US Treasury market resumed its hawkish repricing. The rising expectations of a more hawkish Fed under new Chair Kevin Warsh have been putting sustained upward pressure on yields.
Yesterday, Treasury yields climbed once again, placing a heavier discount rate on equities and tightening financial conditions further.
In addition, the hawkish repricing has pushed the 2-year US Treasury yield up by 40 basis points since mid-April 2026, outpacing the 10-year yield and resulting in a bear-flattening of the yield curve (see Fig. 2).
Bear flattening typically signals tighter financial conditions, which pressure bank profitability and, in turn, create a negative feedback loop in the DJIA, as the Financials sector carries the largest weight of around 27%.
Let’s now unpack the short-term trajectory (1 to 3 days) of the DJIA from a technical analysis perspective.