Oil Price Surge Continues to Affect Financial Markets

The recent surge in oil prices continues to have a significant impact on the financial markets. On Monday, WTI crude oil closed above $100 per barrel for the first time since 2002, despite Federal Reserve Chairman Jerome Powell's comments that the Fed is inclined to look past short-term oil price shocks.

Powell's remarks helped soothe the bond market, which had begun to seriously price in an imminent rate hike. The US 10-year Treasury yield fell nine basis points on Monday to 4.35%, and the 2-year yield slid eight basis points to 3.83%. However, the odds of one or more Fed rate hikes in 2026 tumbled to 5% from 25% on Friday.

The continued rise in oil prices has pressurized the stock market and crypto, causing them to give up early gains. US stocks gave up their initial gains, with the Nasdaq closing lower by 0.75% and the S&P 500 by 0.4%. Bitcoin also retreated back to $66,500, roughly unchanged over the past 24 hours.