Crude oil rockets to 4-year high as traders price in prolonged Iran blockade

• Strait of Hormuz concerns deepen, raising supply disruption fears.
• US Treasury yields hit one-month high amid hawkish Fed repricing.
• Global bonds sell off sharply as inflation expectations continue to rise.

A sharp surge in crude oil prices, driven by fears that US President Donald Trump could tighten or prolong a months-long blockade affecting Iranian oil flows, rattled global markets on Thursday, sending bond yields higher and reinforcing expectations of prolonged inflationary pressure.

Brent crude jumped 6% overnight to a four-year high of $122.53 a barrel, amid concerns the Strait of Hormuz may remain constrained, amplifying energy market volatility.

The spike in oil weighed heavily on global bonds, with yields climbing as investors reassessed the outlook for interest rates in a more inflationary environment. Markets have largely priced out rate cuts from the US Federal Reserve this year, with a roughly even chance of a hike by next spring.

The shift follows one of the most divided Federal Reserve decisions since 1992, with three policymakers opposing the central bank’s easing bias, while another backed a rate cut. The central bank also acknowledged that rising global energy prices were feeding into inflation risks.

Investors are now watching upcoming signals from the European Central Bank and the Bank of England, both of which are expected to strike a more hawkish tone.

Equity markets in Asia showed resilience, with technology and artificial intelligence-linked shares supported by strong corporate earnings. Futures tracking US tech stocks advanced after upbeat results from major firms, reinforcing optimism around AI-driven growth.

“Macroeconomic risks are significant at this juncture, but stock market bulls hope a rosy path for artificial intelligence can continue to offset cyclical weakness,” said Jose Torres, senior economist at Interactive Brokers.

“If earnings, capital expenditures and outlooks are buoyant, investors could remain sanguine even as the threat of a slowdown in overall activity, loftier borrowing costs and widening credit spreads raise eyebrows,” he added.

In Asia, equities were mixed, though major regional indices remained on track for strong monthly gains, supported by robust demand linked to artificial intelligence.

However, the broader market mood remained cautious, with rising oil prices and geopolitical tensions feeding into currency and bond market volatility. The US dollar strengthened alongside higher yields, while the Japanese yen weakened, reflecting diverging monetary policy expectations and risk sentiment.