Risk Assets Bounce Back as Oil Spike Shakes Fed Rate-Cut Bets
Bitcoin (BTC $67,928.90) and global equities stabilized after early-week losses sparked by an oil price surge amid tensions between the U.S., Israel, and Iran. Bond markets remain cautious, with rising yields signaling inflation concerns and reducing expectations for Federal Reserve rate cuts.
BTC traded above $70,000 on Friday, marking nearly a 10% weekly gain, after briefly hitting $74,000 midweek following a drop to around $65,000 over the weekend. Equity futures mirrored the rebound, with S&P 500 contracts recovering from a multi-week low of 6,718 points on Tuesday to about 6,840 points.
The selloff was driven by reports that Iran blocked tankers in the Strait of Hormuz, a key oil transit route. Markets stabilized after the U.S. promised naval escorts and political risk insurance for shipments.
Bond Yields Rise, Rate-Cut Expectations Fade
The 10-year U.S. Treasury yield rose from 3.93% to 4.15%, while the two-year yield climbed from 3.37% to nearly 3.60%, reflecting tighter monetary policy expectations. CME Fed funds futures now assign less than a 50% chance of two 25-basis-point rate cuts this year, down from nearly 80% before the conflict.
“The rates market reflects tension between a resilient economy and an energy-driven inflation shock,” said Bryan Tan, trader at Wintermute. Analysts note that oil shocks usually unfold gradually, with prices often rising 20–30% over ~60 days as supply disruptions impact inventories and flows.
Strong U.S. economic data have also weighed on Fed-cut bets. The ISM services index hit 56.1 in February, while ADP private payrolls showed 63,000 jobs added—the highest since July 2025. Investors now focus on Friday’s nonfarm payrolls and wage growth figures, which could further influence Fed expectations and market volatility.
