Global economy shudders on oil spike, bond selloff — SkimNews
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- WTI crude surged past US$100 per barrel Thursday for the first time since May, with Brent at US$108 — up more than 40% since early July — as fighting in the Middle East intensified.
- 10-year U.S. Treasury yields hit 4.95% Thursday, the highest level since 2007, while equivalent Canadian government bonds reached 3.95%, a level last seen in 2023.
- The European Central Bank raised interest rates Thursday, with President Christine Lagarde warning that "inflation will be longer lasting than we had anticipated."
- Markets are betting on a Bank of Canada rate hike by year-end — possibly as early as October — and four total hikes by end of 2027, after Governor Tiff Macklem warned oil-driven inflation risks now outweigh Canada-U.S. trade-war risks.
- Houthi forces captured a strategic Yemen port Thursday, threatening maritime shipping through the Bab al-Mandab Strait, while the U.S. and Iran ramped up tanker strikes in the Strait of Hormuz, according to S&P Global Energy.
- S&P Global Energy does not see oil returning to prewar levels before the end of 2027 and expects prices to average US$80–US$100 through next year; U.S. diesel hit US$6 per gallon for the first time ever Thursday.
Why it matters: Canadian households face a one-two hit: national average gas climbed to $1.78 a litre from $1.63 a month ago, while Bank of Montreal chief economist Doug Porter warned any hopes of falling mortgage rates are "quickly going out the window" as the BoC is now expected to hike by October. Long-term borrowing costs for governments, companies and consumers are being driven up by oil, fiscal deficits, and shifting Treasury demand from price-insensitive central banks to price-sensitive buyers.
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