Media365
The fallout from surging oil prices has rippled across global asset classes, from stocks to bonds, as escalating military tensions in the Middle East reset investors’ expectations for inflation and the path of central bank policy.
As US military strikes against Iran intensified, Brent crude traded near a two-year high of US$82.98 a barrel, while futures in New York touched US$75.75, a level not seen since January 2025.
The spike in energy costs has revived fears of a renewed bout of inflation, raising the risk of slower global growth. The shift is already visible across financial markets. Yields on US 10-year Treasuries rose 12 basis points to 4.0575 per cent this week as traders scaled back expectations for interest-rate cuts by the Federal Reserve. Stocks slid on waning risk appetite, while the US dollar strengthened on haven demand.
“A sustained rise in oil prices, reinforced by transport disruptions, carries significant implications for global inflation paths,” said Laura Cooper, global investment strategist at Nuveen, which manages US$1.3 trillion in assets. “The key question for policymakers is whether higher energy costs de-anchor inflation expectations or are ultimately viewed as a transitory supply shock.”
Investors have already begun to price in a worsening scenario as tensions escalate in the Middle East and the Strait of Hormuz – an Iran-controlled corridor that handles about one-fifth of global oil flows – remains a key flashpoint.
If crude prices remain elevated for longer than expected, it could flip the script on the sentiment on risk assets that has been turbocharged by easier financial conditions and resilient economic growth in recent years.
