Oil Price Surge Driven by US-Iran Conflict Fuels Global Bond Selloff

The recent surge in Brent Oil prices has been driven by the escalating US-Iran conflict, leading to a significant global bond selloff and higher long-end yields. According to Deutsche Bank's Jim Reid, the re-escalation of the conflict pushed Brent crude oil up 42% from its lows at the end of June.

This sharp increase in oil prices has reinforced inflation pressures, despite the PCE data surprising on the downside. The main inflationary pressure was higher oil prices, with Brent crude reaching $103.53/bbl, though it will fall towards $98/bbl due to the month-end change in the benchmark. WTI also rose to $90.42/bbl.

Further out the oil futures curve, concerns about a US-Iran deal were evident, with the Brent future for December 2027 reaching a new high of $81.25/bbl. This move reinforces inflation concerns and hawkish central bank risks.