Oil prices climbed once again above $100 a barrel on Wednesday and government bond yields jumped, amid renewed inflation fears combined with growing uncertainty over relations between the US and Iran.
Oil remained the main force driving markets, overshadowing other factors, according to Andreas Lipkow, an analyst at CMC Markets.
After falling at the start of trading, the Brent crude, the international benchmark, rose back above $100 to $102.71 a barrel, up 3.49% by 5.50 p.m. in Brussels. US benchmark WTI gained 2.18% to $92.49 a barrel.
Bond yields up
Investors were faced with a mix of rising uncertainty and conflicting signals from the Middle East.
A cargo vessel caught fire in the strategic Strait of Hormuz after being hit by a projectile of “unknown origin,” the UK Maritime Trade Operations agency said on Wednesday.
That development came a day after Donald Trump said talks between Tehran and Washington had resumed, describing a three-hour meeting with Iranian representatives as “very good”.
After easing earlier in the day, bond yields surged again as the rebound in oil prices revived concerns about inflation.
Isabelle de Gavoty, head of European equity management at AllianzGI, said the move could also be linked to fresh data suggesting growth remains strong in both Europe and the United States.
Strong growth in European private-sector activity
Robust activity figures can be seen as a potential source of further inflationary pressure, Christophe Boucher, chief investment officer at ABN Amro, explained.
In the Eurozone, private sector activity recorded its strongest growth in September since April 2023, helped by a rebound in German industry, according to S&P Global’s flash Purchasing Managers Index (PMI), published on Wednesday.
Germany’s 10-year bond yield, the main benchmark in Europe, rose to 3.55% by 5:50 p.m. in Brussels, from 3.46% at Tuesday's close.
France’s 10-year yield climbed by 0.15% to 4.65%, while Belgium’s rose by 12% to 4.22%.
In the United States, the 10-year Treasury yield reached 5.07%, up sharply from 4.96% at the previous close.
European stock markets gave up earlier gains and moved lower. Paris dropped 0.39%, Frankfurt lost 0.66%, London slipped by 0.03% and Milan fell by 0.21%. In Brussels, the Bel 20 dropped 1.24%.
Equity markets remain resilient
On Wall Street, by 5:40 p.m. Brussels time, the Dow Jones was down 0.54%, the S&P 500 had fallen 0.53% and the Nasdaq was off 0.91%.
Even so, de Gavoty said equity markets remain close to record highs and have shown strong resilience to geopolitical tensions, supported by solid corporate earnings in recent quarters.
Markets were also watching closely for Xi Jinping’s visit to Washington. The Chinese president was due to arrive on Wednesday evening, Washington time, for a summit with Donald Trump, with trade and artificial intelligence expected to be among the main topics.
The dollar, the main currency used in the oil market, also benefited from rising crude prices. It gained 0.52% against the euro, with one euro buying $1.1391.
