Houthi attacks and U.S.-Iran escalation push oil prices higher, tightening financial conditions and stoking inflation fears.
Brent crude surged above $96 per barrel after Houthi forces struck two oil tankers in the Red Sea, escalating disruption risks in key shipping corridors. The attacks, coupled with renewed U.S.-Iran tensions, have heightened concerns over supply constraints in the Strait of Hormuz and Red Sea routes.
Bond markets are reacting to the oil spike as an inflation shock, driving Treasury, Bund, and gilt yields higher. Investors are pricing in a more persistent energy-driven inflationary pressure, tightening global financial conditions before central banks have fully addressed growth-inflation trade-offs.
The combination of oil near $100 and rising yields is creating a stagflationary environment, dampening risk appetite. Europe is particularly vulnerable to the energy and rates shock, while Asia may still benefit from technology-driven cycles.