US Stocks and Canadian Dollar Slip as 10-Year Treasury Yield Nears 5% and Oil Surges on Saudi Pipeline Shutdown

U.S. stock futures fell Tuesday morning as investors braced for a high-stakes Federal Reserve policy decision, with the 10-year Treasury yield hovering around 5%, a level not seen in roughly two decades, and crude oil prices climbing sharply. Chip and AI stocks faced a renewed sell-off, with all three major index futures pointing lower ahead of the open, reflecting anxiety over persistent inflation signals and the possibility of another rate hike.

The surge in oil prices traces directly to the shutdown of Saudi Arabia's East-West pipeline, which was struck by drone attacks originating from inside Iraq on September 11, 2026. The pipeline, which has the capacity to move roughly 4.5 million to 7 million barrels per day and serves as a critical bypass of the Strait of Hormuz, remained closed as of Tuesday. Brent crude futures rose about 2% on the day to near $107.82 a barrel, extending gains of more than 21% over the past month, while West Texas Intermediate traded near $101 to $103 a barrel. Analysts at Kpler estimated the market could lose 120 million barrels in exports if the outage persists for a month.

Rising oil prices deepened inflation concerns just as the Fed convenes its policy meeting, with market odds of a rate hike having climbed sharply in recent weeks. The Canadian dollar also slipped against the U.S. dollar, as higher oil typically supports the loonie but rate worries and the prospect of a more aggressive Fed offset that lift. TSX futures edged lower in sympathy with their U.S. counterparts. The confluence of geopolitical supply disruption, bond market stress, and central bank uncertainty has left traders in a defensive posture heading into the Fed's announcement.