The World Isn't Prepared for What Just Happened to Oil
•March 3, 2026
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Why It Matters
Markets are distinguishing between transient supply shocks and lasting inflation, so the selloff in Treasuries reflects higher expected short‑term rates rather than runaway inflation—raising the odds of tighter Fed policy and near‑term market volatility. Prolonged disruptions to Gulf oil flows would materially raise energy costs and strain Asian supply chains, with broader implications for growth and corporate margins.
Summary
Renewed conflict with Iran has driven a sharp short‑term spike in energy prices—U.S. crude jumped to about $72–73/barrel in late trading and wholesale gasoline (RBOB) surged from $1.99 to $2.37 per gallon over two days—while buyers also flocked to gold and silver. U.S. Treasuries moved counterintuitively: nominal yields rose (10‑year ~3.93% to ~4.06–4.07%, 2‑year ~3.38% to ~3.50%) even as TIPS breakeven inflation rates fell, signaling the market is repricing the Fed’s policy path rather than pricing persistent inflation. Analysts note the move mirrors a similar, short‑lived shock last year: if the conflict is brief the oil and gasoline spikes may quickly reverse, but sustained disruption to Persian Gulf supply routes would add upward pressure. The episode underscores broader, long‑term geopolitical risks tied to deglobalization that could make such supply shocks more frequent and severe.
Original Description
The conflict erupting with Iran has already impacted financial markets, though the initial impact has been pretty muted. Most of the effect has fallen on the energy sector and related, no surprise. Oil has surged above $70 per barrel, US benchmark, while wholesale gasoline has soared 17% just since Thursday. Interest rates are up though not in the way you might think. Instead, USTs are signaling something else - something big.
Eurodollar University's Money & Macro Analysis
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