Oil Prices Climb Above $90, Sending Treasury Yields Higher and Rate Cut Expectations Lower

The bond market is starting to signal growing concern.

This week, the yield on the U.S.

10-year Treasury rose to around 4.65%–4.67%, which is its highest level since May 2026.

One of the main reasons is the renewed conflict between the U.S. and Iran, which has increased concerns about global oil supplies.

As fears of supply disruptions grow, oil prices have climbed sharply.

Brent crude has risen above $90 per barrel, while U.S. benchmark West Texas Intermediate (WTI) crude has climbed above $87, both reaching their highest levels in about six weeks.

Unlike previous periods of rising oil prices, the U.S. now has less room to respond.

The country’s Strategic Petroleum Reserve (SPR), which is used to help stabilize energy markets during supply disruptions, has been significantly reduced.

As of July 10, the reserve stood at about 316.5 million barrels, which is its lowest level since April 1983.

With stockpiles now at their lowest level in more than four decades, the government has much less flexibility to draw on the reserve again without pushing it to levels considered operationally risky.

Rising Oil Prices Lift Treasury Yields Higher oil prices can quickly increase inflation expectations because energy costs affect everything from transportation to manufacturing.

When investors expect inflation to stay higher for longer, they usually demand higher returns to hold long-term U.S. government bonds.

That is one of the main reasons Treasury yields have moved higher this week.

The shift in expectations has also changed how traders view the Federal Reserve’s next move.

Rising oil prices have increased concerns that inflation could remain stubborn, leading investors to expect a greater chance of another interest rate hike.

Money markets were pricing in a 26% probability of a July rate hike as of Tuesday, up from just 10% the day after a cooler-than-expected Consumer Price Index (CPI) report was released the previous week.

Growth Stocks and Crypto Face Higher Rate Risks If oil prices remain high and the government has limited ability to release more crude from the Strategic Petroleum Reserve, inflation could stay elevated for longer than investors currently expect.

If that happens, the Federal Reserve may decide to keep interest rates higher for longer instead of cutting rates as many investors had anticipated.

Higher interest rates, particularly on long-term Treasury bonds, also affect how investors value assets.

As bond yields rise, the discount rate used to calculate the present value of future earnings increases.

This tends to put more pressure on growth stocks and speculative assets, including cryptocurrencies, because much of their value depends on profits or cash flows expected many years into the future.

Will Higher Oil Prices Force the Fed to Act? Inflation fears alone are not always enough to trigger tighter monetary policy.

So, while oil prices often surge during geopolitical conflicts, they can fall just as quickly once tensions begin to ease.

If the current rise in oil prices proves to be temporary, it may not be enough to change the Federal Reserve’s interest rate plans.

Recent history offers a good example.

In 2025, concerns that tariffs would drive inflation unsettled financial markets, but the Fed ultimately did not respond with an interest rate hike.

How this current situation evolves will largely depend on how the conflict between the U.S. and Iran either escalates or de-escalates.

But for now, the current spike in Treasury yields signals that investors are becoming more cautious, but have not reached levels that suggest widespread panic.

Over the coming weeks, the direction of Brent and WTI crude oil prices, as well as comments from Federal Reserve officials, will provide more important clues, giving a clear direction about what’s next.

Disclaimer: This article is from an unpaid external contributor.

It does not represent ’s reporting and has not been edited for content or accuracy.