Oil Tests 200-DMA as US Strikes Iran; Bonds Sell Off on Hawkish Fed Minutes

Oil benchmarks tested their 200-day simple moving averages overnight after the US launched additional strikes on Iranian soil in retaliation for an attack on vessels in the Strait of Hormuz. Brent crude and WTI both touched those levels before pulling back gradually into Thursday's European morning.

FP Markets chief market analyst Aaron Hill wrote that as long as tanker traffic continues moving through the Strait, markets will not treat the back-and-forth as a full-blown escalation. WTI is defending $73.85. Brent is holding $78.33. Both are pricing a risk premium that could unwind quickly if shipping lanes stay open and diplomacy resumes.

The oil bid is not the only force reshaping the macro picture. Global bond yields rose Wednesday and extended into Asian trade, with government debt in Japan, Australia and New Zealand under pressure. US two-year yields are hovering near year-to-date highs. The driver is a rethink on the Federal Reserve.

The minutes from the June 16-17 FOMC meeting showed the decision to leave the federal funds rate on hold at 3.50%-3.75% was unanimous. The tone was hawkish. Members flagged elevated inflation driven by "strong AI-related demand, the conflict in the Middle East, or the effects of tariffs" and added that, given strong labor market conditions, the Fed would likely need to increase the fed funds rate to bring inflation back to 2%. A few members saw a case for hiking at the June meeting but opted to hold.

The OIS curve is now almost fully pricing in a 25-basis-point hike by year-end. Higher oil prices reinforce that calculus: energy costs filter into headline and core inflation measures, leaving the Fed less room to wait. The next major test is the US June CPI report. If core measures come in above forecasts, the odds of a hike in October or even September rise sharply. That scenario would keep the dollar supported and add to upward pressure on two-year yields.

Equity markets are reading the same data in different ways. The S&P 500 slipped about 0.2% Wednesday. The Dow fell over 1%. The Nasdaq eked out a small gain as chipmakers rallied. Broadcom and Nvidia both had strong days, helped by news of an expanded Apple-Broadcom chip agreement. Nvidia climbed 3.65% to $204.12, earning an Alpha Score of 71/100, a moderate read.

Asian stocks offered a mixed scoreboard overnight. South Korea's KOSPI ended 0.2% higher. Japan's Nikkei 225 added 1.7%. Australia's ASX 200 dipped about 0.5%. The tension between higher oil (bearish for net importers, bullish for energy) and the AI-heavy bid (supportive for tech stocks on dips) is the dominant two-handed risk.

The calendar is thin Thursday: weekly jobless claims and existing home sales. Fed officials Logan and Williams are speaking. Given how sensitive yields are to rate signals, their comments could move two-year yields further. The real pivot remains next week's CPI. If core inflation surprises to the upside, the pendulum swings toward an earlier hike. That would pressure growth stocks, support the dollar, and likely cap oil's rally if a tighter policy path weighs on demand expectations. If the print is soft, the rate-hike timeline drifts back to late 2025, and the bond selloff has room to pause.