Brent crude moved above $108 as fighting in the Middle East deepened, adding fresh strain to global bond markets and risk assets. On Sept. 10, Brent jumped 6.3% to $107.63 a barrel, then touched $110 in early trading.
According to BlockTempo, the conflict has spread from Iran to Yemen and Saudi Arabia. The U.S. and Iran exchanged airstrikes, while the Iran-backed Houthis advanced along the Red Sea and attacked Saudi Arabia, casting a deeper shadow over both the Strait of Hormuz and the Bab el-Mandeb Strait.
Treasury yields break higher as 30-year auction demand hits a 24-year low
The oil shock quickly spilled into the U.S. government bond market. The 10-year Treasury yield rose 11 basis points intraday to 4.954%, its highest level since October 2023. The 2-year yield climbed 13 basis points to 4.56%, while the 30-year yield reached 5.368%, also marking a multi-year high.
Treasury Secretary Bessent bought back about $5.2 billion of 10-year and 20-year Treasuries the same day, but the amount fell short of the expected $6 billion. The market response was limited.
The sell-off was global. The U.K. 10-year yield moved above 5.37%, the highest since 2007. Germany’s 10-year yield rose to 3.5%, a 15-year high. Japan’s 10-year yield moved above 3% for the first time in 30 years. The European Central Bank also raised rates by 25 basis points to 2.65%, its second hike since the Iran conflict began.
Hotter-than-expected PPI lifts September hike odds
U.S. producer prices for August came in above forecasts. Headline PPI rose 5.4% year over year, above the 5.1% expectation and July’s 4.7%. Core PPI increased 4.6%.
After the release, market pricing for a 25-basis-point Federal Reserve rate hike on Sept. 16 climbed to 67% to 70%. Betting markets on Polymarket and Kalshi both rose to 63%, up 9 percentage points in a single day.
Risk assets weaken, Bitcoin liquidations hit $562 million
Risk assets moved lower across the board. The S&P 500 closed down 0.6% at 7,594, extending its losing streak to four sessions. The dollar index added 0.3% to 99.1. Gold dropped 1.7% to $4,326 after trading at $4,700 a week earlier.
Bitcoin fell 0.9% to about $77,140 and briefly touched $76,651 after the PPI release. Total liquidations across the crypto market reached $562 million over 24 hours. The report added that Bitcoin still showed better resilience than gold during the latest pullback.
August CPI now stands as the final test before the FOMC meeting
The market tension is centered on two warnings at once: inflation data is running hot while growth concerns are also building. Stronger price data leaves the Federal Reserve with less room to sound dovish, while higher oil prices and higher yields tighten pressure on companies and consumers.
Tonight’s U.S. August CPI report is seen as the final checkpoint before the FOMC meeting. If the data also comes in above expectations, bets on a 25-basis-point hike could shift from positioning to broader market consensus. For Bitcoin, short-term price action remains tied to rate-hike expectations and the direction of the U.S. dollar.