A sharp surge in oil prices and escalating geopolitical tensions are fueling renewed inflation fears, while traditional safe-haven assets begin to lose their footing.
Only weeks ago, expectations for U.S. monetary policy were firmly tilted toward rate cuts in 2026. That outlook is now shifting. With economic activity showing limited signs of slowing, inflation still running above the Federal Reserve’s 2% target, and oil prices soaring 50% in just three weeks, markets are starting to consider the possibility of a rate hike as early as April.
According to CME FedWatch data, the probability of a rate increase at the Fed’s next meeting has risen to 12%, up from zero just one week ago. This marks a notable turnaround from two months ago, when consensus expectations pointed toward a rate cut during that same period.
Recent inflation data adds to the pressure. February figures showed headline inflation at 2.4% year-over-year and core inflation at 2.5%—both recorded before the escalation of the Iran conflict and the sharp rally in oil prices.
Bond markets are reacting swiftly. The yield on the U.S. 10-year Treasury climbed another 10 basis points on Friday to 4.38%, compared to below 4% at the start of March. The sell-off is global in scope. In the U.K., 10-year gilt yields have surged past 5%, marking a 15% increase over the past month and reaching their highest level since 2008.
Equity markets have not yet seen dramatic declines, but downward pressure is building. The S&P 500 slipped 0.9% on Friday, putting it on track for a fourth consecutive weekly loss and leaving it down more than 5% since late February. The Nasdaq has mirrored the move, falling 1.2% on the day.
Precious metals, which had rallied strongly ahead of the conflict, are now retreating. Gold has dropped from roughly $5,500 per ounce at the start of the month to $4,569, while silver has fallen from $95 to $69.50 per ounce.
In contrast, Bitcoin is drawing attention for its relative resilience. Andre Dragosch, European Head of Research at Bitwise, described the cryptocurrency as a “canary in the macro coal mine,” suggesting it may already be pricing in recession risks that traditional markets have yet to fully reflect.
Trading around $70,000, Bitcoin has posted modest gains since early March and remains one of the better-performing assets since geopolitical tensions intensified.
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