Oil Price Spike Sends Global Markets into Tailspin

Global markets are reeling from an oil price spike and bond selloff, driven by increased tensions in the Middle East. The cost of a barrel of West Texas Intermediate crude has surpassed $100 for the first time since May, while Brent crude hit $108.

This surge in energy prices is rippling through bond markets worldwide, with investors betting that central banks will raise interest rates to combat inflation. In the US, 10-year Treasury bond yields reached a 15-year high of 4.95%, while Canadian Government of Canada bond yields hit 3.95%.

Bank of Canada Governor Tiff Macklem has warned that upside inflation risks from high oil prices now outweigh downside economic risks from the Canada-US trade war, prompting markets to bet on a quarter-point rate hike by year-end and four hikes by 2027.