Commodities
Oil Prices Tied to Interest Rates at 35-Year High
The correlation between oil price volatility and interest rate volatility has reached a 35-year high, according to Cboe Global Markets' Macro Volatility Digest.
The one-month rolling correlation between front-month WTI crude oil and the 10-year Treasury yield hit 0.96 around mid-September, with a perfect correlation being 1.0.
This convergence is driven by escalating geopolitical tensions centered on the Strait of Hormuz and the Fed's rate hike in September, pushing the policy rate to the 3.75-4% range.
The previous correlation peaks occurred during periods of oil market stress, but none featured the combination of triple-digit crude, active Fed tightening, and a geopolitical flashpoint all at once.