As Oil Hits $100, Bonds and Stocks Decline Globally – Europe Market Wrap
Stocks slumped as the Middle East conflict caused further turbulence in energy markets, pushing oil above $100 per barrel for the first time since 2022. Bonds suffered further losses, as the Dollar reached its highest level since January.
S&P 500 futures fell 1% as the US-Israeli assault on Iran showed no signs of de-escalation. Brent rose 12% to $104 a barrel after Gulf producers reduced output, raising fears of an inflation shock and lifting the 10-year Treasury yield 3 bps to 4.17%. The Dollar gained 0.3%.
The rise in oil prices and losses in bonds and stocks were initially more severe, but news that the Group of Seven finance ministers would consider a possible coordinated release of oil from reserves dampened the movements.
Europe’s Stoxx 50 was on the verge of a correction, falling over 10% from its February top. The region’s bonds had a harsher selloff than their US counterparts, with traders fully pricing in two ECB interest rate hikes and increasing betting on a BoE move. The yield on two-year UK gilts rose 21 bps.
Gold declined as the currency strengthened and concerns about higher interest rates grew. Bullion has been under pressure as rising petroleum prices fuel inflation fears in the US, increasing the possibility that the Fed would keep interest rates constant for longer.
