U.S.-Iran Strikes Put $100 Oil Back in Focus

U.S.-Iran strikes reignite fears of a prolonged Middle East conflict as Hormuz tensions push regional oil benchmarks above $100.

Rising Bond Yields Turn Oil's Rally Into a Demand Risk

Global bond yields have surged to their highest since 2008, as rising oil prices perpetuate fears of longer-than-assumed inflation, in turn creating a cycle of lower demand further down the road.

The rally in bond yields started in earnest after new Federal Reserve chairman Kevin Walsh vowed to finally tame US inflation, currently at 3.4%, sending yields on the 10-Year Treasury bonds to 4.76%.

The bond spiral extended into other developed economies, with rates on 10-year Japanese bonds touching a 30-year high and moved above 3%, whilst 10-year UK bonds surged to 5.2%.

Higher yields raise borrowing costs for households and companies, slowing vehicle purchases, air travel, construction, manufacturing and freight – all leading to demand destruction – whilst simultaneously pushing up the cost of drilling, pipelines and large upstream developments.

Marking a return to contractionary monetary policy, the market is pricing an almost 60% chance that the Federal Reserve will hike rates by a quarter-point at its meeting this month.

US midstream giant ONEOK (NYSE:OKE) has acquired Brazos Midstream's natural gas gathering and processing assets in West Texas for a consideration of $4.4 billion, boosting its gas processing capacity by 1.2 bcf/d.

Oil majors Shell (LON:SHEL) and Chevron (NYSE:CVX) have signed a preliminary agreement with the government of Ghana to enter the South Deepwater Tano oil block, in water depths of 3,000m, the country's first new offshore license since 2018.

Norway's state oil firm Equinor (NYSE:EQNR) has signed its 2nd binding offtake agreement, alongside project partner Standard Lithium, for the SW Arkansas lithium project, with the LG Energy Solution contract marking a major step towards an FID later this year.

UK-listed upstream specialist Energean (LON: ENOG) is reportedly in exclusive negotiations with UK major BP (NYSE:BP) to acquire part of the latter's Egyptian upstream portfolio, in a deal valued around $1 billion. - Norwegian upstream firm DNO (OSL: DNO) is set to buy UK upstream independent Capricorn Energy for $0.4 billion after outbidding the offer of Kurdistan-focused driller Genel Energy, boosting its portfolio with assets in onshore Egypt.

The first exchange of direct US-Iran attacks in a month has reignited fears that conflict in the Middle East might well last into 2027, with US President Trump threatening further strikes after its attack on Larak Island. Washington's sanctions on Tehran are making Hormuz transits ever more difficult, with Saudi Aramco's attempt to boost flows from the Persian Gulf immediately nipped in the bud by Tehran's drone attacks. Whilst ICE Brent is currently trading at $92 per barrel, Middle Eastern benchmarks have moved past $100 per barrel again.