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U.S.-Iran strikes lift oil prices above $100 as bond yields surge
Oil prices rallied as Hormuz tensions pushed regional benchmarks past $100, while global bond yields hit the highest levels since 2008, reviving inflation and demand risk.
U.S.-Iran strikes have reignited fears of a longer Middle East conflict, with Hormuz-related concerns pushing regional oil benchmarks above $100, according to OilPrice.
At the same time, global bond yields have surged to their highest levels since 2008. OilPrice attributes the move to expectations that higher oil prices could keep inflation elevated, which would be consistent with the idea of longer-than-assumed inflation.
OilPrice also points to a sharp turn in bond markets after new Federal Reserve chairman Kevin Walsh said the Fed would move to tame U.S. inflation, currently at 3.4%, sending the 10-year Treasury yield to 4.76%. The yield climb has also spread to other developed economies, including Japan and the United Kingdom, raising borrowing costs and increasing the risk of weaker future demand, from consumer spending to business activity.
The broader repricing in rates comes alongside major energy deal and operations updates cited by OilPrice, including ONEOKs acquisition of Brazos Midstream assets in West Texas for $4.4 billion to boost gas processing capacity by 1.2 bcf/d. The outlet also notes that the market is pricing an almost 60% chance of a Federal Reserve quarter-point rate hike at this months meeting.