Oil prices climb as bonds rout

Brent crude and government bond yields rose together on Monday, May 18, as investors reacted to higher energy prices, fresh Middle East tensions and renewed concern that inflation could stay elevated. Reuters reported that bonds from Tokyo to New York extended losses, pushing yields higher across major markets. U.S. stock index futures slipped, while the dollar firmed against most major currencies as traders pared back risk. Brent crude moved above $111 a barrel, according to Bloomberg and market data cited by Trading Economics. ### Why were oil and bond yields rising at the same time? Reuters reported from Singapore that rising energy prices linked to the ongoing Middle East war fanned inflation fears and encouraged bets that central banks could keep policy tighter for longer. That combination pressured government bonds, whose prices fall as yields rise, and lifted crude on concern about supply disruption. (globalbankingandfinance.com) Bloomberg said the deadlock over the Iran war pushed Brent above $111 a barrel and deepened inflation fears. Reuters also reported that fresh Middle East tensions were lifting oil prices and sapping risk appetite in broader markets on May 18. ### Which market numbers mattered most on May 18? (globalbankingandfinance.com) The benchmark 10-year U.S. Treasury yield rose as high as 4.631% earlier in the day, Reuters reported, the highest level since February 2025. The two-year yield touched about 4.10%, while the 30-year yield rose to about 5.159%, according to Reuters summaries carried by Yahoo Finance and other outlets. (bloomberg.com) Trading Economics said Brent crude rose to about $110.34 a barrel on May 18, while Bloomberg reported Brent traded above $111 during the session. The difference reflects intraday movement and different market snapshots, but both pointed to oil holding near its highest levels of the recent Middle East-driven run-up. ### How did the move hit stocks and currencies? (money.usnews.com) U.S. stock index futures edged lower on Monday as rising Treasury yields and oil prices weighed on equities, Reuters reported. Yahoo Finance said the jump in yields lifted the dollar and cast a shadow over stock markets that had been buoyed by artificial-intelligence enthusiasm in recent weeks. (tradingeconomics.com) Reuters reported from Hong Kong that the dollar firmed against most major currencies as the bond selloff and higher crude prices dented risk appetite. The yen remained under pressure, with traders also watching for possible intervention. ### Was this only about geopolitics? CNBC reported on May 15 that Treasury yields had already surged after a week of uneven inflation data, as traders tried to price the likely path of interest rates under Federal Reserve Chair Kevin Warsh. (money.usnews.com) Monday’s oil move added another inflation-sensitive input to markets that were already uneasy about rates. (wkzo.com) The World Bank said on April 28 that energy prices were projected to rise 24% this year as the war in the Middle East sent a severe shock through global commodity markets. That forecast predated Monday’s trading, but it showed that official institutions had already been warning about the inflationary effect of higher energy costs. (cnbc.com) ### What are traders watching next? Reuters said investors were awaiting key earnings from Nvidia and Walmart later this week, even as Treasury yields and oil prices remained the immediate drivers of cross-market moves on May 18. Bond traders will also continue to watch whether the 10-year Treasury yield holds near 4.6% and whether Brent remains around or above $111 a barrel. (money.usnews.com) (worldbank.org)