Risk Assets Recover as Oil Surge Dampens Fed Rate-Cut Bets
Bitcoin (BTC $67,928.90) and global equities stabilized after early-week losses sparked by a jump in oil prices amid U.S.-Israel-Iran tensions. Bond markets, however, remain cautious, with rising yields signaling renewed inflation risks and lowering expectations for Federal Reserve rate cuts.
BTC traded above $70,000 on Friday, up nearly 10% for the week, after briefly hitting $74,000 midweek following a weekend drop to around $65,000. Equity futures mirrored the rebound, with S&P 500 contracts recovering from a multi-week low of 6,718 points on Tuesday to roughly 6,840 points.
The selloff was initially driven by reports that Iran blocked tankers in the Strait of Hormuz, a critical oil transit route. Markets eased after the U.S. promised naval escorts and political risk insurance for shipments.
Yields Climb, Fed Cuts in Question
The 10-year U.S. Treasury yield rose from 3.93% to 4.15%, while the two-year yield jumped from 3.37% to nearly 3.60%, reflecting tighter monetary policy expectations. CME Fed funds futures now assign less than a 50% probability to two 25-basis-point cuts this year, down from nearly 80% before the conflict.
“The rates market reflects the tension between a resilient economy and an energy-driven inflation shock,” said Bryan Tan, trader at Wintermute. Analysts note that oil shocks typically affect inflation gradually. Jack Prandelli highlighted that oil often rises 20–30% over ~60 days after geopolitical shocks, with the full impact unfolding as supply flows adjust.
Recent U.S. economic data have reinforced these trends. The ISM services index rose to 56.1 in February, and ADP private payrolls added 63,000 jobs, the strongest reading since July 2025. Market eyes now turn to Friday’s nonfarm payrolls and wage growth figures, which could further shape Fed expectations and market volatility.
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