Bonds and Stocks Sell Off as Oil Rally Extends: Markets Wrap
(Bloomberg) — Another surge in oil spurred by the escalating Iran war sent global stocks, bonds and metals lower, with concern intensifying that central banks will be forced to tighten policy to keep inflation in check.
Short-dated bonds led losses on worries European central banks might have to hike and the Federal Reserve will remain on hold this year. The yield on two-year Treasuries climbed as much as 18 basis points to 3.95% before paring the move. The rout was deeper across the Atlantic, driving Britain’s similar-maturity yields higher by 27 basis points to 4.37%.
The S&P 500 headed toward its lowest since November, breaching its 200-day moving average. A gauge of European shares slipped 2.1%. Brent topped $110 and natural gas jumped as strikes in the Persian Gulf threatened long-term damage to major energy facilities. Gold declined for a seventh straight session. Silver sank 7%.
The Bank of England “stands ready to act” against inflation, but Governor Andrew Bailey warned about “reaching any strong conclusions” about the odds of hikes. The European Central Bank said it’s well placed to deal with the dangers from the war while the Bank of Japan kept the possibility of an April rate increase on the table.
That all followed Fed Chair Jerome Powell’s signals this week that officials won’t cut rates until inflation resumes cooling. BNP Paribas strategists said the Fed may even raise the possibility of hiking if energy prices remain high and unemployment stays stable.
Iran maintained attacks on energy assets even after US President Donald Trump called for restraint. Spy chief Tulsi Gabbard acknowledged the US and Israel have different goals for their military campaign. Defense Secretary Pete Hegseth pushed back against criticism the conflict risked becoming a military “quagmire.”
Complacent investors who assume there will be a swift resolution to the war are making a high-risk bet given how bad surging oil prices typically end up being for stocks, according to JPMorgan Chase & Co.’s Dubravko Lakos-Bujas.
“While $100 oil is jarring for markets even for a few days, it would be even more jarring for stocks and the economy if these oil price levels persisted for even a few weeks or even a few months,” said Dennis Follmer at Montis Financial. “The duration of this oil price spike is exactly what the market is trying to figure out, and that’s why there is volatility.”
Treasury Secretary Scott Bessent said the US is looking to remove sanctions that it has long imposed on Iranian oil in an effort to lower surging energy prices triggered by its war in the Gulf, and could also look at a unilateral release of its own reserves.
Three weeks of conflict in the Middle East have upended the entire energy supply chain. With the vital Strait of Hormuz all but closed, gasoline and jet fuel prices are surging, cooking gas shortages are triggering fistfights in India and farmers are fretting about diesel and fertilizer.
“While a less damaging outcome in the Strait of Hormuz remains possible, recent events have narrowed that path and heightened the risk of continued volatility,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.
Corporate Highlights:
FedEx Corp. opened 2026 on a tear, but with the war in Iran threatening to crimp growth, its results after the bell represent a test of Wall Street’s faith in economic resilience. Micron Technology Inc. warned that it will need to spend heavily on production to meet burgeoning demand, overshadowing a generally upbeat forecast. Alibaba Group Holding Ltd. aims to quintuple cloud and AI revenue to $100 billion annually in five years. One of Eli Lilly & Co.’s most highly anticipated experimental medicines helped diabetic patients lose more weight than any drug currently on the market. Novo Nordisk A/S won approval to sell a high-dose version of its blockbuster Wegovy obesity shot in the US. What Bloomberg Strategists say…
“It’s no panic just yet but markets are waking up to a broader, more prolonged Middle East commodity shock than previously anticipated. If it persists, earnings will be next to crack.”
—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.5% as of 12:05 p.m. New York time The Nasdaq 100 fell 0.5% The Dow Jones Industrial Average fell 0.6% The Stoxx Europe 600 fell 2.1% Currencies
The Bloomberg Dollar Spot Index fell 0.4% The euro rose 0.6% to $1.1525 The British pound rose 0.8% to $1.3369 The Japanese yen rose 1.1% to 158.09 per dollar Cryptocurrencies
Bitcoin fell 2.6% to $69,365.4 Ether fell 3.2% to $2,116.84 Bonds
The yield on 10-year Treasuries declined one basis point to 4.26% Germany’s 10-year yield advanced one basis point to 2.95% Britain’s 10-year yield advanced eight basis points to 4.82% Commodities
West Texas Intermediate crude rose 2.2% to $98.40 a barrel Spot gold fell 4.1% to $4,618.86 an ounce ©2026 Bloomberg L.P.
