MARKET WRAPS

Stocks:

European shares were lower Wednesday while oil prices held onto gains as Middle East hostilities escalated, clouding prospects for a near-term deal to reopen the Strait of Hormuz.

The U.S. and Iran exchanged fire on Tuesday as the two countries continued to battle for control of the key waterway.

"While the conflict is enduring and is feeding energy markets with geopolitical uncertainties, oil and natural gas supplies have proved surprisingly resilient so far," Julius Baer said.

Brent crude rose 1% with bond yields also seeing extended gains on Wednesday. The 10-year Bund yields reached their highest since 2011 and yields on U.K. 10-year government bonds climbed to their highest level since 2007.

Importantly, however, bond markets aren't in a panic mode and are functioning properly, Allianz Research said. "Bond markets are still functioning well according to bid-ask spreads or auction demand, but elevated rate levels are rightfully raising debt sustainability concerns."

U.S. Markets:

Stock futures were mixed Wednesday as the war in Iran appears to be far from de-escalating.

Investors will also be watching out for ADP's national employment report for August due today.

Forex:

The euro weakened to its lowest in two weeks against a broadly stronger dollar as renewed Middle East hostilities increased energy prices. Rising oil and gas prices, in addition to increased expectations that the Fed could raise interest rates soon--potentially as early as this month--leave the euro vulnerable to further declines, ING said.

The dollar rose as renewed U.S.-Iran hostilities continued to push oil prices higher.

Bonds:

Eurozone bond yields rose in line with global bonds, as oil price and inflation worries dent market sentiment, pushing the 10-year German Bund yield to another 15-year high.

Treasury yields hit fresh multimonth highs in early trade as an escalation in U.S.-Iran hostilities pushed oil prices up, fueling inflation fears and expectations of an interest-rate hike by the Fed.

The bond market outlook could get worse before it gets better, Allianz Research said. "While current yield levels look attractive, the negative feedback loop between higher rates and debt sustainability could trigger self-fulfilling prophecies in several countries."

Energy:

Front-month Brent crude futures rose 0.6% in European trading Wednesday, extending a 4.6% surge Tuesday. West Texas Intermediate futures gained 0.2%.

Gas

European natural-gas prices surged to their highest level since the end of 2022 as escalating hostilities between the U.S. and Iran fuel worries about prolonged disruptions to energy flows.

Metals:

Gold prices fell to their lowest level in more than three weeks as escalating tensions in the Middle East conflict pushed energy prices higher, stoking inflation fears and boosting rate-hike bets. In early European trading, New York futures fell 0.5%, down 6% on the week.

Iron ore

Iron ore was lower in early trading. Expectations of strong supply in 2H are putting pressure on the black metal, according to Nanhua Futures.

EMEA HEADLINES

Volvo Car Sales Slip on China, U.S. Weakness

STOCKHOLM-Volvo Car said global sales fell 7.4% on year in the three months through August, with demand hit by continuing market challenges in China and the U.S.

The Swedish automaker, which is majority-owned by China's Zhejiang Geely Holding Group, sold 148,239 cars in the period, down from 160,160 in the same three months the year prior, it said Wednesday.

Italian Gaming Group Lottomatica to Merge With Spain's Cirsa

Gaming groups Lottomatica and Cirsa Enterprises have agreed to an all-share merger deal that will see the combined entity retain a listing in both Italy and Spain.

Milan-listed Lottomatica said that Wednesday's deal will see shareholders of Barcelona-based Cirsa receive 0.668 newly issued Lottomatica shares for each share held, with current Lottomatica shareholders expected to own 67.5% of the combined company and Cirsa shareholders holding the remaining 32.5%.

BP Appoints Interim Chairman Ian Tyler to Permanent Role

BP said its interim chairman, Ian Tyler, would take on the role permanently, becoming the U.K. oil major's third chair in less than a year given the removal of Albert Manifold in May.

The appointment ends a three-month search and follows a period of management upheaval at BP as the company seeks to move back to its oil-and-gas roots after a push into renewables. BP's chief executive, Meg O'Neill, started in her role in April.

U.S. and Iran Trade Strikes in Latest Fight for Control of Hormuz

The U.S. and Iran exchanged fire Tuesday as the two countries continued to battle for control of the Strait of Hormuz.

President Trump said the U.S. strikes were launched in retaliation for Iran's attempt to mine the strait and target American servicemembers in the Middle East over the weekend.

GLOBAL NEWS

G-20 Squabbling Overshadows Summit as Global Bond Markets Strain

ASHEVILLE, N.C.-Treasury Secretary Scott Bessent arrived here to host global economic officials in the Blue Ridge Mountains, fresh off the breakdown of trade talks with Canada, currency and bond-market interventions, and President Trump's renewed economic threats against Iran.

Two days later, the G-20 finance ministers' gathering comes to a close amid a global bond-market selloff, spats over tariffs, public insults and fighting over a group photo.

U.S. and Iran Trade Strikes in Latest Fight for Control of Hormuz

The U.S. and Iran exchanged fire Tuesday as the two countries continued to battle for control of the Strait of Hormuz.

President Trump said the U.S. strikes were launched in retaliation for Iran's attempt to mine the strait and target American servicemembers in the Middle East over the weekend.

Australia's Second-Quarter Growth Stronger Than Expected

SYDNEY-Australia's economy was stronger than expected in the second quarter, stoking the case for the Reserve Bank of Australia to raise interest rates further amid sticky inflation.

The economy grew 0.4% from the prior quarter, and by 2.1% from a year earlier, the Australian Bureau of Statistics said Wednesday. The pace of growth beat market expectations of annual growth around 1.8%.

Charlie Kirk Murder Case Sent to Trial, With Death Penalty a Possibility

The man accused of killing conservative activist Charlie Kirk potentially faces the death penalty after a Utah judge ruled on Tuesday there was enough evidence to warrant a trial for aggravated murder.

Tyler Robinson, 23 years old, was in court for an evidentiary review, an early stage of the legal process under Utah law in which prosecutors need to show they have enough evidence to establish probable cause and move forward.

The Island Paradise That Is a Secret Hub for Russian Sanctions Evasion

MALÉ, Maldives-The white sand beaches, turquoise waters and secluded luxury resorts of this South Asian archipelago attract millions of tourists each year. But a new trade has quietly emerged behind the postcard-perfect backdrop: a web of companies helping Russia evade sanctions.

Hundreds of millions of dollars in goods that are restricted or destined for sanctioned companies have changed hands at the airport, according to documents reviewed by The Wall Street Journal and interviews with Western officials. Some of these goods serve both civilian and military uses. The airport's cargo holds are often filled with aircraft parts and electronic components, as well as other restricted goods, according to the documents and officials.

House Votes to Censure GOP Lawmaker Over Sexual-Harassment Allegations

WASHINGTON-The House voted overwhelmingly Tuesday to censure Rep. Chuck Edwards (R., N.C.) over allegations that the lawmaker sexually harassed two young female staffers and created a hostile work environment.

The measure passed 413 to 2. Only Edwards and Rep. Ralph Norman (R., S.C.) voted no.

Write to priscila.barrera@wsj.com