Key facts
- Crude oil prices have surpassed $100 a barrel for the first time since July.
- The U.S. 10-year Treasury yield is nearing 5%, its highest level since 2023.
- The 30-year U.S. Treasury yield reached a nearly two-decade high above 5.38%.
- The 2-year U.S. Treasury yield jumped to almost 4.6%, its highest point in 14 months.
- The European Central Bank raised its policy rate to 2.50% from 2.25% to combat energy-driven inflation.
- Traders are pricing in a more than 65% chance of a quarter-point rate increase by the Federal Reserve next week.
Global borrowing costs are surging as oil prices climb back above $100 a barrel amid escalating geopolitical tensions between the U.S. and Iran, and new threats in the Red Sea. This has pushed the benchmark 10-year U.S. Treasury yield near 5%, its highest level since 2023, with the 30-year yield reaching a nearly two-decade high above 5.38% and the 2-year yield hitting a 14-month high of almost 4.6%.
The European Central Bank responded to energy-driven inflation by raising its policy rate to 2.50% from 2.25%. Markets are now anxiously awaiting the U.S. CPI inflation report and the Federal Reserve's upcoming meeting, where traders are pricing in a greater than 65% chance of a quarter-point rate increase.
The renewed conflict concerns stem from tit-for-tat strikes between the U.S. and Iran, including the U.S. reportedly destroying five Iranian oil tankers and Iran's Revolutionary Guards firing ballistic missiles at a base in Jordan and attacking ships near the Strait of Hormuz. Iran-aligned Houthis have also advanced down the Red Sea coast, threatening the Bab el-Mandeb Strait, a key oil export route.
President Donald Trump has commented that he expects the war with Iran to end after the November U.S. midterm elections, though Tehran has shown little willingness to negotiate. Meanwhile, Vice President JD Vance and Secretary of State Marco Rubio have reportedly warned Trump that the conflict could extend beyond his presidency.