Trump comments fire up oil prices, jolt investors’ inflation expectations
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- Oil futures jumped as much as 6% to roughly $78 a barrel Wednesday after Trump declared the interim agreement with Iran 'over,' reaching a two-week high though still well below the $100-plus prices that prevailed from mid-March through May.
- Eurozone inflation expectations for one year ahead rose 14 basis points to 1.992%, and traders priced in 35 basis points of further tightening this year from the European Central Bank — up from 25 bps on Tuesday.
- Short-dated bond yields spiked across regions, with German and UK two-year yields each up 10 basis points to near one-month highs and the U.S. two-year yield up 5 bps as rate-cut expectations reversed.
- Volatility gauges snapped higher across asset classes, with the VIX jumping from prewar lows and similar moves in bond and currency volatility after months of muted trading.
- Gold fell 1.1% to about $4,060 an ounce, roughly 23% below its pre-war peak, as a stronger dollar and rising rate-hike bets outweighed the metal's typical safe-haven appeal.
- Semiconductor stocks kept sliding, with a memory-chip ETF down about 8% and the Philadelphia semiconductor index off 5% since the Nasdaq's June 1 record, as growing doubts about AI-revenue durability compounded the sell-off.
Why it matters: If Brent revisits its $100-plus spring peak — when inflation gauges 'flashed bright red' for policymakers — the Gulf mini-glut that had recently pulled prices lower will be over, and European rate-cut trades will keep unwinding. German and UK two-year yields both jumped 10 bps to roughly one-month highs Wednesday, underscoring how quickly oil-driven inflation shocks are reactivating tightening bets.
