June WTI crude oil futures today settled higher by $4.48 to $106.42 but I’m more interested in longer-dated contracts that continue to creep up. That’s arguably where bonds and equities have traded off since the conflict. Early on, the market mostly took Trump at his word that oil would come down after the conflict. There was some sense that the US had a plan.
That no longer seems like the case and December WTI was also up $4.14 today to $83.67. That broke the previous high set on March 23 and is a strong signal that patience is running out.
December WTi, Daily
Today Iran attacked UAE oil infrastructure and showed it will not willingly allow the US to escort ships out of the Strait of Hormuz, let alone allowing them back in (something Trump said he doesn’t want to do for now).
And the clock continues to tick with the war now in its 10th week compared to the 4-6 week plan. All the leaks about negotiating positions show the US and Iran far apart, though Trump today said Iran is now more malleable to a deal.
The bond market looks awfully like long-dated oil as US 30-year yields today rose above the 5% barrier and to the highest levels since August — when the Fed began signalling rate cuts. The 6 basis point rise today puts US 30-year fixed mortgage rates above 6.5% US 30s are also about 14 basis points from taking out the May 2026 tariff panic high.
Those rates will boomerang back into corporate balance sheets, US government borrowing costs and consumer spending.
Earlier today, I wrote about how an inflationary storm is brew in the US and moves like this push the market towards pricing in more ratre hikes. Just today those odds bumped up and now there is a 1-in-3 chance of a US rate hike before year end.
That’s not a good dynamic for US equities, despite the AI boom. The Russell 2000 opened 0.5% higher today but is now down 0.5%. I think tech stocks can mostly ignore rising rates but the real economy — and assets affected by it — can’t.
