Brent crude sat at $100.85 a barrel on Friday, a day after a 7% jump took it to a two-month high of $102. Asian shares sold off, Reuters reported, and bond markets took the hit with them.
Two things pushed oil up. Iran-aligned Houthis attacked Saudi tankers in the Red Sea, choking a second major Middle East supply route on top of Iran’s near-closure of the Strait of Hormuz. And it is two weeks since an interim truce meant to end the war effectively collapsed. US forces launched air strikes on Iran into Friday morning, and Tehran fired at neighboring Arab countries that host US bases. Brent has climbed nearly 40% this month.
“Two of the world’s busiest shipping corridors are under threat in the same month, and markets are only just beginning to work out what that means,” said Nigel Green, CEO of deVere Group. He called it “less like a short-lived spike and more like a genuine reopening of the inflation question.”
Bonds and rates
Word that Washington will impose higher tariffs on goods from 60 trading partners did not help. Yields on 30-year US Treasuries came close to their highest since 2007, and benchmark European borrowing costs reached levels last seen in 2011.
Traders now see a one-in-three chance of a Federal Reserve rate hike as soon as next week. A week ago that was off the table. A September move is more than fully priced in. The European Central Bank held rates overnight, but markets put a September hike at about 70%.
The US 10-year yield held at 4.7013% after touching an over 18-month high of 4.7030%. The 30-year was steady at 5.17%, just under a 19-year peak of 5.201%.
Stocks, yen and metals
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 1%. Japan’s Nikkei slid 2.9% and South Korea’s KOSPI dropped 3.7%. On Wall Street, stocks had fallen overnight after Alphabet and Tesla, the first two “Magnificent Seven” companies to report, burned through cash on AI infrastructure spending. Nasdaq futures edged up 0.1% as strong Intel results gave only brief support.
The dollar index held at 101.46. The yen sat near 40-year lows at 163.89 per dollar, which drew a warning from the US Treasury that excess volatility was undesirable. Japan’s finance minister has repeatedly warned of possible intervention after buying yen in April and May. Tony Sycamore, an analyst at IG, said defending the yen now would be “akin to standing in the way of a bullet train.”
Gold slipped 0.1% to $4,043 an ounce after falling 2% overnight. Silver held at $57.45 after dropping 3.4%.
