Reuters: A sharp surge in crude oil prices, driven by fears that US President Donald Trump could tighten or prolong a months-long blockade affecting Iranian oil flows, rattled global markets on Thursday. The development pushed bond yields higher and reinforced expectations of prolonged inflationary pressure.
Brent crude jumped 6% overnight to a four-year high of ‘$122.53 per barrel’, amid concerns that the Strait of Hormuz may remain constrained, amplifying energy market volatility and raising fears of supply disruptions.
The spike in oil prices weighed heavily on global bonds, with yields climbing as investors reassessed the outlook for interest rates in a more inflationary environment. Markets have largely priced out rate cuts from the US Federal Reserve this year, with a roughly even chance of a rate hike by next spring.
This shift follows one of the most divided Federal Reserve decisions since 1992, with three policymakers opposing the central bank’s easing bias, while another supported a rate cut. The Fed also acknowledged that rising global energy prices are contributing to inflation risks. Investors are now closely watching signals from the European Central Bank and the Bank of England, both of which are expected to adopt a more hawkish stance.
Equity markets in Asia showed resilience, with technology and artificial intelligence-linked shares supported by strong corporate earnings. Futures tracking US tech stocks also advanced, reinforcing optimism around AI-driven growth.“Macroeconomic risks are significant at this juncture, but stock market bulls hope a positive trajectory for artificial intelligence can continue to offset cyclical weakness,” said Jose Torres, senior economist at Interactive Brokers.
“If earnings, capital expenditures, and outlooks remain strong, investors could stay optimistic despite concerns over slowing economic activity, higher borrowing costs, and widening credit spreads,” he added. In Asia, equities were mixed, though major indices remained on track for strong monthly gains, supported by robust demand linked to artificial intelligence.
However, overall market sentiment remained cautious, with rising oil prices and geopolitical tensions contributing to volatility in currency and bond markets. The US dollar strengthened alongside higher yields, while the Japanese yen weakened, reflecting diverging monetary policy expectations and shifting risk sentiment.
