Share markets in Asia experienced a slide on Monday as renewed fighting in the Gulf and Iran's assertion of closing the vital Strait of Hormuz caused oil prices to surge. This development reignited global inflation risks. As a result, the 2-year Treasury yields climbed, reaching their highest point since early 2025 at 4.2393 percent. Concurrently, Fed fund futures indicated 39 basis points of policy tightening by the year's end.
The dollar strengthened alongside bond yields, as investors increased the likelihood of a Federal Reserve interest rate hike. This comes just a day before Federal Reserve Chair Kevin Warsh is scheduled to address Congress for the first time in his new capacity. Brent crude saw a 4.1 percent increase, reaching $79.11 a barrel, up from a recent low of $70.14, while U.S. crude also rose by 4.1 percent to $74.37 a barrel. The dollar index remained firm at 101.13.
Upcoming inflation figures for June, set to be released on Tuesday, could initially show a cooling in the headline rate from 4.2 percent due to declining petrol prices. However, this trend is now expected to reverse as oil prices resume their upward trajectory. In commodity markets, the increase in yields exerted pressure on non-interest bearing gold, which dropped 1.1 percent to $4,076 an ounce. The euro weakened slightly to $1.1394, largely because Europe is more dependent on foreign oil compared to the U.S.
