Brent crude tops $104 as Hormuz attacks lift oil and bond yields

Brent crude rose $4 on Thursday to top $104 a barrel as attacks on tankers around the Strait of Hormuz intensified and US Gulf of Mexico producers began shutting output ahead of Storm Isaias, according to Theguardian. The jump reignited inflation worries, drove government bond yields higher and pushed stock markets lower in Europe and Asia.

Theguardian reported the benchmark had climbed from $102.8 a barrel, up 2.6%, earlier in the session, while European gas benchmarks reached two-week highs.

Also read: UK pays 5.383% on 10-year gilts, highest since 1999

Key facts

• Brent crude advanced $4 on the day to more than $104 a barrel, its highest in a week.
• Theguardian put the number of attacks on oil, LNG and LPG tankers around the Strait of Hormuz at 12 in the week to 5 October — a weekly high since the US and Israel began the Iran war on 28 February.
• Nasdaq cited UK Maritime Trade Operations reporting nine vessels targeted over the last several days, with Shell having said flows out of Hormuz had recovered to about 80% of prewar levels.
• The yield on the 30-year UK gilt rose 3 basis points to 6.0117%, after touching 6.036% on Wednesday, the highest since January 1998; the 10-year gilt yield rose 5bps to 5.48%, a level last seen in July 2007.
• Nasdaq reported the 10-year T-note yield reached a 24-year high of 5.362% on Wednesday before settling at 5.282%, and noted the EIA cut its 2026 global crude demand forecast to 102.4 million bpd from a January forecast of 104.8 million bpd.

Bonds and currencies under pressure

The oil move fed straight into fixed income. Theguardian reported the euro slipped to $1.1191, close to a 17-month low, while the 10-year US Treasury yield rose to 5.33%, a figure Nasdaq put at 5.331% during the same session. The benchmark Dutch gas contract rose nearly 3% to €80.39 per megawatt hour, the first reading above €80 since 21 September, and the British front-month contract climbed 3.1% to 199.69p per therm.

European equities slid, with the pan-European Stoxx 600 down almost 1% to a near four-month low. Nasdaq reported the Euro Stoxx 50 closed down 1.47% at a 3.75-month low, Japan’s Nikkei 225 fell 0.92%, and China’s Shanghai Composite did not trade because of Golden Week holidays.

Also read: Hormuz crude exports near pre-war levels as diesel lags

UK gilts, housing and the Bank of England

Long-dated gilt yields above 6% increase the pressure on chancellor John Healey before his first budget on 28 October. Berenberg senior UK economist Andrew Wishart told Theguardian that most of the rise in gilt yields since the pandemic reflected the return of interest rates to normal, and that extra increases this year assume four Bank of England hikes that he does not consider necessary. He said the 10-year yield would probably reverse much of its 2026 surge in 2027 and reach 4.7% by end-2027.

The prospect of higher rates is already weighing on housing. Theguardian reported the Royal Institution of Chartered Surveyors’ house price balance fell to -32 last month from -28 in August, a bigger decline than expected, and that markets expect the Bank of England to raise rates from 3.75% to 4% in November, followed by three more quarter-point increases next year. Nasdaq reported US mortgage applications fell 4.2% in the week to 2 October, with the average 30-year fixed rate up 19 basis points to a 2.75-year high of 7.49%.

Why it matters

Higher crude prices feed directly into headline inflation, which is why traders moved quickly from oil to bonds and equities on both sides of the Atlantic. That raises the cost of government borrowing, squeezes households through mortgage pricing, and complicates the Bank of England’s path at a time when it has kept borrowing costs unchanged, unlike the Federal Reserve, the ECB and the Bank of Japan. Nasdaq noted the hawkish minutes of the 15-16 September FOMC meeting, where most participants judged another rate increase would likely be appropriate by year end, and that Q3 S&P 500 profits are expected to climb 25% year on year — an earnings backdrop that has so far absorbed some of the rate pressure.

What to watch

Investors will track whether US Gulf of Mexico output restarts as Storm Isaias passes, and whether attacks near Qatar continue. In the UK, the chancellor’s 28 October budget and the market’s pricing of a November Bank of England rate rise are the next concrete tests.

This is not financial advice; oil, bond and currency markets are volatile and prices can move sharply in either direction.

Written by

Benjamin

Benjamin Carter covers business, finance, and the stock market for StockPil, focusing on the trends and data that matter to everyday investors.

Sources: The Guardian, Nasdaq