US Treasury yields have retreated from a two-and-a-half-month high, with the benchmark 10-year Treasury note falling more than 5 basis points to 4.05%. This decline is attributed to easing inflation fears following a drop in oil prices, which fell over 5% to below $70 a barrel. The decrease in oil prices is linked to reports suggesting that Israel may refrain from targeting Iranian oil infrastructure amidst ongoing tensions in the Middle East.
The volatility in oil prices is significant as the Middle East supplies about a third of the world's oil. As traders increasingly tie their trades to oil futures, concerns about inflation have risen, particularly in the US where a recent jobs report indicated strong wage growth and a higher-than-expected consumer price index (CPI) reading. The US CPI for September rose by 2.4% annually, slightly above economists' expectations, while Canada's annual CPI saw a decline to 1.6%, the lowest since February 2021.
- Traders and investors are closely monitoring the geopolitical landscape in the Middle East, as escalating tensions could further influence oil prices and, consequently, inflation expectations. The upcoming US presidential election is also a factor that may affect economic policies and market reactions. Analysts suggest that while the current data points to easing inflation fears, the situation remains fluid and could change rapidly based on geopolitical developments.
