US-Iran Conflict Sends Oil Prices Above $100 as Bond Yields Soar

The escalating conflict between the United States and Iran has sent oil prices soaring above $100 a barrel, pushing global bond yields higher as investors fret about inflation risks.

Oil prices surged by around 6% on Thursday, with Brent crude reaching nearly $108 a barrel. The jump in energy prices has heightened concerns about inflation, which is expected to rise 3.4% year-on-year, according to market estimates.

The uncertainty over the conflict's duration and its impact on energy supplies is driving up the risk premium, with traders, energy companies, and government officials differing in their assessments of supply disruptions.

As a result, bond yields have risen, with the yield on 10-year U.S. Treasury bonds surpassing 4.9%, its highest level since 2023. The European Central Bank has already raised its key interest rate to 2.50% in an effort to contain energy-driven inflation.