Home / News / Oil is driving the rise in long-term yields; Everything else is just noise
Oil is driving the rise in long-term yields; Everything else is just noise
<p class="isSelectedEnd">The rise in long-term bond yields is being blamed on a growing list of factors, but there is a much simpler explanation sitting in plain sight: oil prices are the main driver of the rise in long-term yields, and the Iran war is the reason oil is rising.</p><p class="isSelectedEnd">Brent crude has pushed back above $100 a barrel as the US-Iran conflict escalated, while the 10-year Treasury yield has climbed above 4.8%, its highest level since 2023. </p><p>Oil goes up, yields follow</p><p class="isSelectedEnd">The key transmission mechanism is inflation. An oil price shock does not stay confined to the energy market. Higher crude prices feed into gasoline, diesel, transportation and production costs. If the shock persists, investors begin to worry that inflation will remain higher for longer, especially without a central bank's response. </p><p class="isSelectedEnd">That matters enormously for long-duration bonds. If the inflation outlook deteriorates, investors demand a higher yield to compensate for the loss of purchasing power and the greater uncertainty around future interest rates.</p><p class="isSelectedEnd">That is why the relationship between oil and long-term yields matters more right now than many of the other headlines competing for attention or suiting the price action. Below you can clearly see the tight correlation between the US 10y Treasury yield (red) and WTI crude oil (blue). </p><p class="isSelectedEnd"></p><p>The Iran war is the comm
Higher education in Financial Engineering and Money & Capital Markets. SPK (Turkey CMB) licence. 16 years across institutional markets, research, and quant-driven analytics.
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<p class="isSelectedEnd">The rise in long-term bond yields is being blamed on a growing list of factors, but there is a much simpler explanation sitting in plain sight: oil prices are the main driver of the rise in long-term yields, and the Iran war is the reason oil is rising.</p><p class="isSelectedEnd">Brent crude has pushed back above $100 a barrel as the US-Iran conflict escalated, while the 10-year Treasury yield has climbed above 4.8%, its highest level since 2023. </p><p>Oil goes up, yields follow</p><p class="isSelectedEnd">The key transmission mechanism is inflation. An oil price shock does not stay confined to the energy market. Higher crude prices feed into gasoline, diesel, transportation and production costs. If the shock persists, investors begin to worry that inflation will remain higher for longer, especially without a central bank's response. </p><p class="isSelectedEnd">That matters enormously for long-duration bonds. If the inflation outlook deteriorates, investors demand a higher yield to compensate for the loss of purchasing power and the greater uncertainty around future interest rates.</p><p class="isSelectedEnd">That is why the relationship between oil and long-term yields matters more right now than many of the other headlines competing for attention or suiting the price action. Below you can clearly see the tight correlation between the US 10y Treasury yield (red) and WTI crude oil (blue). </p><p class="isSelectedEnd"></p><p>The Iran war is the comm
