Oil Tops $100, Treasury Yields Near 5% as Trump Ties Iran War to Midterms
Crude closed above $100 a barrel and 10-year Treasury yields hit three-year highs after Trump linked the war's end to the midterms, with the ECB expected to hike rates.
Energy and bond markets came under fresh strain after US President Donald Trump said the Iran war would not end until after November's midterm elections, remarks delivered as Gulf shipping faced its heaviest attacks of the conflict so far.
Crude oil closed at its highest level since late May, settling above $100 a barrel on Wednesday, while 10-year Treasury yields climbed to their highest in three years and closed in on the 5% mark. Six-month Brent crude futures edged further toward $90 a barrel following the president's primetime address.
The market moves followed a wave of tit-for-tat strikes on oil tankers in the Gulf — the most intense since the war began six months ago. Trump indicated in the speech that an end to the fighting, and any relief on fuel prices, would come only after the midterms. He also promised every American a $5,000 check if Republicans win the elections, a pledge that would cost the Treasury more than $1 trillion and would likely have to be borrowed.
Top White House advisers, including Vice President JD Vance and Secretary of State Marco Rubio, have privately warned Trump that the conflict could extend through the remainder of his presidency.
Investor sentiment was further dented by a planned $6 billion buyback of longer-dated bonds, which disappointed those who had expected more from the operation.
Attention now turns to the European Central Bank's policy decision, with a quarter-point hike to 2.5% widely expected — the second increase this year — as inflation has been aggravated by Iran-related energy price spikes. European natural gas futures touched their highest in three years, and money markets have priced in two more rate rises over the next 12 months.
US producer price inflation data for August is due on Thursday, along with weekly jobless claims and existing home sales, while a 30-year bond auction is also scheduled.
Separately, fresh concerns in the artificial intelligence sector over damage to software firms from new models, reports of rogue AI agents and headline-grabbing warnings from Anthropic employees about risks to humanity have added to the unease. Markets may struggle to price such warnings, but they could have to weigh the regulation of AI development that such forecasts invite.