Oil Prices Soar as Middle East Conflict Uncertainty Drives Global Markets Down
Global stock markets declined on Thursday as oil prices surged due to ongoing inflation fears and Middle East conflict uncertainty. The US Federal Reserve's potential interest rate hike is also driving bond yields higher, with the 10-year Treasury yield reaching its highest level since 2007.
The benchmark US 10-year Treasury yield rose to 4.33%, while Japan's 10-year yield jumped to a 30-year high during Asia trading hours. The 30-year yield in the US reached its highest since 2004, causing concerns among investors.
Neil Wilson, investor strategist at Saxo UK, attributed the rise in bond yields to 'the US economy booming', while Deutsche Bank's Jim Reid pointed out that strong US business activity data played into the narrative of resilient growth. This has led market expectations for another 25-basis point rate hike by the US Federal Reserve next month to rise to around 75%, up from 55% last week.
The uncertainty surrounding the Middle East conflict, particularly the Strait of Hormuz, is also driving oil prices higher. International benchmark contract Brent crude topped $107 per barrel, with IG analyst Chris Beauchamp warning that such momentum can become self-sustaining unless progress is made in ending the turmoil.