Soaring oil prices impact the bond market, with the 10-year US Treasury yield posting its largest weekly increase since "Liberation Day" tariffs.

The escalating situation in the Middle East has driven up oil prices significantly, affecting the US Treasury market with a scale of around $30 trillion this week, making it the worst week since Trump's "Liberation Day" tariff impact in the past. Investors are concerned that the spike in energy prices will reignite inflationary pressures, leading them to demand higher yields to hold onto bonds. Data shows that the yield on 10-year US Treasury bonds rose to 4.131% on Friday, an increase of 17 basis points from the previous week, marking the largest weekly increase since April 11, 2025. In April last year, US President Trump announced the "equal tariffs" policy, causing market volatility, with bond yields spiking by 50 basis points within five days. The core driver of this week's bond market volatility is the spike in oil prices. As the conflict with Iran escalates, oil prices are nearing a two-year high, sparking concerns in the market about a global inflation resurgence. As inflation rises, it erodes the real return on fixed-income bonds, prompting investors to demand higher yields as compensation. The rise in energy prices has been particularly intense. US crude oil futures rose by approximately 36% this week, marking the largest weekly increase in history, closing at $90.90 per barrel on Friday. Global benchmark Brent crude oil also rose by approximately 27% this week, closing at $92.69. David Kang, CEO of Ducenta Squared Asset Management, stated that the impact of rising oil prices on the global economy may surpass the tariff factor. "Logistics depend fundamentally on fuel, and the impact of energy prices on the economy may be even greater than tariffs." Apart from the rise in energy prices, the market is also concerned about the fiscal pressure that wars could bring. According to the Center for Strategic and International Studies, the cost in the first 100 hours of a conflict is estimated to be around $3.7 billion. Meanwhile, US Treasury Secretary Bennett announced on Friday the launch of a $200 billion Persian Gulf shipping reinsurance plan to restore oil tanker and shipping activities in the Strait of Hormuz. However, some investors believe that the rise in oil prices does not yet pose a long-term impact. Peter Graf, Chief Investment Officer at Amova Asset Management America, stated that it is still difficult to judge how long the conflict will last, and thus the rise in oil prices is not yet seen as a long-term structural impact. At the same time, the latest employment data in the US has added to market uncertainty. The unexpectedly negative job report in February exacerbates concerns about economic growth prospects, leading investors to consider whether oil price shocks and rising interest rates could exert greater pressure on the economy. In terms of the stock market, the three major US stock indices generally fell this week. The Dow Jones Industrial Average fell by about 3% this week, marking the largest weekly drop since early April; the S&P 500 fell by 2%, and the Nasdaq Composite Index fell by 1.2%. Globally, economies that are highly dependent on energy imports are experiencing more pronounced impacts. Jan Nevruzi, a rate strategist at DCM Securities, stated that the European bond market is under greater pressure from the energy shock. For example, the yield on 10-year UK government bonds rose to 4.69% this week, before falling back to around 4.47%, compared to a low of about 4.23% the previous week. Gannon Earhart, Senior Interest Rate Analyst at TCW, pointed out that the market is not only concerned about rising oil and gas prices, but also about the potential for transportation disruptions in the Strait of Hormuz to strain the region's production capacity and storage capabilities, thus prolonging the global oil supply recovery time. However, he also mentioned that the latest employment data may prompt the Federal Reserve to pay more attention to the downside risks in the labor market rather than just inflationary pressures, which could provide room for further interest rate cuts this year. He emphasized that conclusions should not be drawn solely based on one set of data, and that future policy paths will require more confirmation from economic data.