US bonds and stocks sell off as crude oil rally extends

The S&P 500 dropped about 1%, heading toward its lowest since November

• Oil surge from Iran war sends stocks and bonds lower globally
• Central banks may tighten policy to control inflation
• Brent oil tops $112 as attacks threaten energy facilities

Did our AI summary help?

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 concern European central banks will be forced 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, with Britain’s similar maturity yields increasing 30 basis points to 4.39%.

The S&P 500 dropped about 1%, heading toward its lowest since November. The decline was more pronounced across the Atlantic, with a gauge of European shares falling over 2%. Brent topped $112 and natural gas increased as escalating attacks in the Persian Gulf threatened long-term damage to major energy facilities. Gold fell for a seventh straight session.

The Bank of England said it “stands ready to act” against a surge in inflation triggered by war in the Middle East. The European Central Bank kept rates unchanged as it warned the war could shift its expectations for the economy. The Bank of Japan kept the possibility of an April hike on the table after leaving policy unchanged.

That all followed Fed Chair Jerome Powell’s signals this week that the US central bank won’t cut rates until inflation resumes cooling. BNP Paribas strategists say the Fed may even raise the possibility of hiking in April if energy prices remain high and the unemployment rate stays stable.

Iran maintained attacks on energy assets around the Middle East even after US President Donald Trump called for restraint.

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.