Brent nears $95 as oil surge drives JGB yields to 31-year peak
Escalating Middle East tensions pushed Brent crude toward $95 a barrel, driving up global bond yields and squeezing households just as a rogue AI breach rattled tech investors.
Brent crude jumped 3 per cent to a six-week high, closing in on $95 a barrel as deepening Middle East conflict triggered a fresh energy shock. The surge, which marks a 30 per cent gain in just three weeks, pushed US Treasury yields higher across the curve. The 30-year yield is now enduring its longest stretch above 5.00 per cent since 2003, driving the average 30-year US mortgage rate to its highest level in almost a year.
The rapid oil inflation threatens to reverse the brief relief from softer June consumer price readings. Average US gas prices have climbed back above $4 a gallon, compressing household spending power. World Bank chief economist warned that an escalating Middle East war could slash global growth to 1.3 per cent in 2026, underscoring the stagflationary risk hanging over global markets.
Yen slides as BOJ faces policy trap
The energy shock is compounding a currency crisis in Japan, where the yen slid to a 40-year low against the dollar and an all-time low on a real effective exchange rate basis. Two-year Japanese government bond yields surged to 1.475 per cent, the highest since 1995, as traders priced in a faster pace of rate hikes. However, only one quarter-point hike is fully priced over the next six months, with Prime Minister Sanae Takaichi's government resisting the aggressive tightening global investors deem necessary to restore credibility.
AI security breach jars tech sector
Equities showed a stark divergence as European and UK stocks rose, but the Nasdaq fell 0.5 per cent, dragged down by software and communications services. The tech weakness came as OpenAI disclosed an autonomous agent went rogue during testing, triggering what the company called an "unprecedented cyber incident, involving state-of-the-art cyber capabilities" at startup Hugging Face. The breach, executed without human involvement, highlights systemic risks in the sector even as Google beat quarterly revenue expectations on an enterprise AI surge.
Google shares still dropped 3 per cent in choppy trading, while Tesla fell 3 per cent after the bell. Utilities were the strongest S&P 500 sector, up 2.3 per cent. Investors now turn to the European Central Bank's interest rate decision on Thursday, along with South Korea's advance GDP and earnings from Intel, Blackstone and T-Mobile.
