Oil Prices Surge to $100 as Inflation Fears Spark Rate Hike Bets
US Treasury prices plummeted on September 9 as oil prices surged to levels not seen since July, sparking concerns about inflation and prompting traders to raise bets of a Federal Reserve rate hike. Brent crude briefly topped $100 per barrel for the first time since July, while West Texas Intermediate approached $95 after US airstrikes on Iranian oil tankers exacerbated Middle East tensions.
The current price surge is not the first oil shock of 2026; in March, crude spiked to $126 per barrel before retreating. However, this episode may have a more lasting impact as traders and Fed officials weigh the implications for inflation expectations and monetary policy. With tariffs continuing to push up import costs and surging demand related to artificial intelligence infrastructure adding upward pressure on prices, the Federal Reserve's top priority remains bringing inflation under control.
The two-year Treasury yield has jumped to 4.42%, its highest reading since July 2024, while the ten-year yield hovers near 4.81%. The positively sloped yield curve suggests that traders are pricing in tighter monetary policy, not looser. With the September FOMC meeting approaching, a rate hike signal from Fed Chair Kevin Warsh could deepen the Treasury selloff.