Oil Prices Surge as Markets Priced in Longer US-Iran Conflict
Oil prices have surged to their highest levels since May as markets reassess the timeline for an end to the US-Iran conflict. The prolonged war is forcing traders to price in a longer period of constrained supply, with Brent crude pushing above $105 per barrel and WTI trading around $100.
The Trump administration's suggestion that the war will continue beyond November has led to a revision of earlier expectations for a swift resolution. Senior advisers are reportedly preparing for the possibility that the conflict could last well beyond November, highlighting the lack of a clear exit strategy.
The increased risk premium embedded in crude prices is bad news for risk assets and bonds, with the US 10y Treasury yield approaching a new cycle high.