Brent Oil: Conflict-driven surge shapes bond stress – Deutsche Bank

Deutsche Bank’s Jim Reid highlights that Brent Oil has surged sharply in Q3 as the US–Iran conflict re-escalated, driving a major global bond selloff and higher long-end yields. The report notes fresh gains in Brent and WTI, warns about benchmark roll effects on front contracts, and flags strength further out the futures curve, reinforcing inflation concerns and hawkish central bank risks.

Oil rally reinforces inflation pressures

"Overall, it was a tricky quarter, as the re-escalation in the US-Iran conflict pushed Brent crude oil up +42.0% from its lows at the end of June. So that led to a major global bond selloff, with 10yr Treasury yields up for a 7th consecutive month for the first time since 2011."

"Even as the PCE data surprised on the downside, there were still other inflationary pressures in the mix yesterday. The main one was higher oil prices once again, with Brent crude (+0.92%) up to $103.53/bbl, though due to the month-end change in the benchmark this will now fall towards $98/bbl so be careful when you now look at the front contracts."

"WTI (+1.16%) was up to $90.42/bbl. There wasn’t a single catalyst for that, but the moves came amidst growing scepticism that the US and Iran would reach a deal anytime soon."

"Indeed, that concern was clear further out the oil futures curve, with the Brent future for December 2027 up +0.54% to a new high of $81.25/bbl yesterday."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)