Brent crude touched $100 per barrel this week for the first time since July, as escalating conflict in the Middle East, including U.S. strikes on Iranian oil tankers and Houthi attacks on Saudi infrastructure, reignited fears of prolonged supply disruption. U.S. crude wasn't far behind, climbing to $95.70. Brent and WTI are each up more than 60% year-to-date.
The knock-on effects are showing up fast in fixed income. The 10-year Treasury yield touched 4.8% Wednesday, nearing its highest level since 2023, as traders price in the risk that central banks hold rates steady — or hike — to fight energy-driven inflation. AAA data shows the national average diesel price hit a record $5.94/gallon, with gasoline up 7.3 cents in a single day, the sharpest one-day jump since May. That's a direct input into headline CPI and a variable the Fed can't ignore heading into its next decision.
For bond investors, this is a reminder that geopolitical risk premium doesn't stay contained to energy markets. It bleeds into duration risk, breakeven inflation expectations, and investment-grade corporate spreads for anything transportation or energy-adjacent. Traders are watching Strait of Hormuz tanker traffic closely; further disruption could keep upward pressure on yields well into Q4.
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