Brent crude jumped above $108 a barrel and Treasury yields hit their highest levels since 2007 after hopes for a US-Iran deal on the Strait of Hormuz faded over the weekend. S&P 500 and Nasdaq 100 futures fell as pricier oil and higher borrowing costs weighed on markets.
S&P 500 futures fell 0.5% and Nasdaq 100 futures dropped 0.9% Monday, as oil's climb past $108 a barrel pushed Treasury yields to their highest since 2007.
Oil jumps as Iran talks stall
Brent crude rose more than 4% to $108.63 a barrel in late-morning London trading, after President Donald Trump rejected Iran's proposal to reopen the Strait of Hormuz over the weekend. The move hit bond markets: the 10-year Treasury yield climbed as much as 0.05 percentage points to 5.23%, while the two-year yield rose a similar amount to 4.91%.
According to the Financial Times: "With little hope of the squeeze from energy prices ending, bonds remain under pressure", said Gordon Shannon, fund manager at TwentyFour Asset Management.
Rate bets firm as inflation risk builds
The Federal Reserve raised borrowing costs earlier this month for the first time since 2023, and futures markets now price two more quarter-point rises by January — a reversal from the cuts investors had expected before the US-Iran conflict sent energy prices higher. Pooja Kumra, a rates strategist at TD Securities, said the sell-off reflects persistent economic resilience combined with no clear roadmap for resolving the war, pushing investors to bet rates stay higher for longer. Other major central banks are expected to follow with their own rate hikes in coming months to contain a burst of conflict-driven inflation.
Global bond and equity markets buckle
UK gilt yields also weakened, with the 10-year rate up as much as 0.07 percentage points to 5.43%, close to its highest since 2008. French and Italian 10-year yields hit fresh multiyear highs, with French borrowing costs at their highest level since 2008. In Japan, two-year government bond yields rose as much as 0.05 percentage points to 1.98% before easing to about 1.97%, a level not traded above since 1995, after Bank of Japan minutes showed some members calling for faster rate rises.
The pressure spread to Asian equities. China's CSI 300 slipped 2.2% to its lowest level since August 2025, while South Korea's Kospi fell 2.7% as both markets resumed trading after mid-autumn festival holidays. China's 10-year government bonds bucked the global rout, trading flat at 1.68%.
Source: Financial Times
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