Oil prices jumped to their highest levels since May amid renewed fighting in the Persian Gulf and investor concerns that the war in Iran will persist longer than previously thought.
Brent crude futures crossed above $107 a barrel and WTI futures neared $102. The possibility of a near-term contraction in oil supplies and a protracted war has been pushing up energy prices for several weeks, with the climb accelerating this week.
Yields on bonds issued by the U.S. government climbed to new multiyear highs. The yield on 10-year U.S. Treasuries climbed 0.082 percent to 4.922 percent. That matched the post-pandemic highs hit amid raging inflation and Federal Reserve interest rate increases aimed at restoring price stability.
Shorter-term Treasury yields also rose, reflecting increased expectations for rate increases from the Fed. The yield on the 2-year Treasury rose sharply, climbing 0.114 percent to 4.541 percent.
Yields on government bonds around the world climbed. Yields on government bonds issued by Germany, the U.K., France, and Japan were higher.
Bond yield rise when bond prices fall. A rising yield reflects investors requiring higher returns for holding government securities. This can be due to rising inflation expectations, rising competition from other securities when investors expect faster growth and higher returns on stocks or corporate bonds, or a more aggressive monetary policy.
The major stock indexes in the U.S. were all down by around six-tenths of a percentage point on Thursday morning. Nine of the eleven sectors of the S&P 500 declined, with consumer staples the only one to rise. The tech heavy communications services sector was flat.
The European Central Bank raised interest rates Thursday, in indicating that it expected inflation to remain above its two percent target for an extended period. Prices in the fed funds futures market implied the odds of a Fed hike next week rose eight points to 69.6 percent.
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