US stocks give back some of the rally sparked by Trump's talk of negotiations with Iran

The Dow Jones Industrial Average was down 127 points, or 0.3%, as of 10:30 a.m. Eastern time, and the Nasdaq composite was 0.8% lower.

The optimism at the week’s start came after President Donald Trump raised hopes that the war could end soon when he said the United States and Iran held productive talks “regarding a complete and total resolution of our hostilities in the Middle East.” His announcement caused stocks to flip immediately from losses to gains.

It calmed worries that the war may cause a long-term disruption to the oil and natural gas industry in the Persian Gulf, one big enough to send a blast of inflation to the region’s customers worldwide.

But Iran has denied such talks are underway, and attacks continued on Tuesday. Iran remains highly suspicious of the United States, which twice under the Trump administration has attacked during high-level diplomatic talks, including with the Feb. 28 strikes that started the current war.

The price for a barrel of benchmark U.S. crude jumped 4.1% to $91.73 and clawed back some of its 10.3% plunge from the day before.

In the bond market, Treasury yields also returned to rising and upped the pressure on financial markets worldwide. Higher yields make mortgages and other kinds of borrowing more expensive for households and for businesses, which slows the economy. They also hurt prices for all kinds of investments, from stocks to gold to cryptocurrencies.

High Treasury yields and disruption in the bond market were factors that Trump named a year ago when he backed off his initial threats for global tariffs made on “Liberation Day.” The moves caused critics to allege that Trump always chickens out, or “TACO,” if financial markets show enough pain.

The yield on the 10-year Treasury rose to 4.38% from 4.34% late Monday and from just 3.97% before the war.

The yield on the two-year Treasury, which more closely tracks expectations for what the Federal Reserve will do with overnight interest rates, rose to 3.89% from 3.83% late Monday.

The Fed came into this year with expectations of resuming its cuts to interest rates, which would give the economy a boost. But oil prices have jumped so much and the threat of high inflation is so large that traders have nearly erased their bets for a cut to rates this year. Instead, some are even betting on the possibility that the Fed may have to hike rates by December, according to data from CME Group.

Higher interest rates would slow the economy, but they would also help keep a lid on inflation.

On Wall Street, Estee Lauder dropped 9.3% to one of the market's sharpest losses after it confirmed it’s in merger talks with Spanish cosmetics company Puig. The potential deal could put such brands as MAC, Clinique, Charlotte Tilbury and Apivita together under one company. Estee Lauder said no final decision has been made yet.

Continued worries about the private-credit industry also dragged the market lower.

The industry has lent money to software companies and others who may not be able to pay back their loans because of AI-powered competitors and other threats. That has investors trying to pull their money out now, which makes it difficult for private-credit fund managers because the loans are long term.

A fund affiliated with Apollo Global Management became the latest to say it’s not letting shareholders get every cent they’re trying to redeem. The Apollo Debt Solutions BDC capped withdrawals at 5% of the fund’s assets after shareholders tried to pull out just over 11%. Apollo Global Management’s stock fell 4.9%.

The market’s losses would have been even worse Tuesday if not for Smithfield Foods. Its stock rose 7.6% after the meat company reported stronger profit and revenue for the latest quarter than analysts expected.

In stock markets abroad, indexes were mixed in Europe. Asian stocks rose in their first chance to trade following Trump’s announcement about talks with Iran. Hong Kong’s Hang Seng jumped 2.8%, and South Korea’s Kospi climbed 2.7% for two of the world’s larger moves.

AP Business Writers Yuri Kageyama and Matt Ott contributed.