Oil Prices vs Bond Yields: Which Is the Bigger Risk for Stock Markets?

Rising US bond yields and oil prices have investors globally worried about their impact on stock markets. The two factors are interlinked, as higher oil prices feed US inflation, raise the risk of monetary tightening, and drive yields up.

The yield on the 30-year US bond has reached its highest since June 2007 at 4.72%, while Brent crude futures rose to nearly $91 per barrel after Iran launched strikes on US forces in the Strait of Hormuz. While both factors are negative for market sentiment, their impact varies depending on the context.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, believes that rising US bond yields pose a bigger risk to equity markets globally. He notes that oil prices at $90 per barrel are manageable but would become an issue if they reach $100.

G Chokkalingam, founder and head of research at Equinomics Research, disagrees, stating that higher oil prices have a direct and significant impact on the Indian economy and markets. He warns that a sustained rise in crude prices to $100 or above would be painful for both the Indian economy and stock market.