The U.S. Treasury market started the week on a positive note, but was soon pressured by a sharp climb in oil prices. This development had an immediate ripple effect across global financial markets, leading to a reversal of gains in the cryptocurrency space and triggering further volatility in equities.
Fed Chair Powell signals caution on interest rates
Speaking at Harvard University, Federal Reserve Chair Jerome Powell said the central bank is not currently focused on short-term shocks in oil prices, maintaining instead that inflation expectations remain “firmly anchored.” Powell’s comments calmed some of the anxiety that had been building around the future trajectory of policy rates, relieving pressure on bond markets as a result.
The yield on the benchmark 10-year U.S. Treasury note fell by nine basis points, settling at 4.35 percent. The closely watched two-year yield also declined, dropping eight basis points to 3.83 percent. Alongside these moves, expectations for future rate hikes diminished sharply. Notably, the probability of multiple rate increases in 2026 dropped significantly compared to last week, falling to just five percent.
Market sentiment shifts as selling intensifies
Although U.S. stocks opened strongly, they reversed course as the session wore on. The Nasdaq closed 0.75 percent lower, while the S&P 500 registered a 0.4 percent decline. Cryptocurrencies followed a similar path: Bitcoin, which had risen at the start of the week, lost momentum and slipped back to around $66,500—leaving it nearly flat over the last 24 hours.
The principal factor weighing on risk appetite was the surge in oil prices. West Texas Intermediate (WTI) crude oil climbed as much as 5.3 percent during the session, coming close to $105 per barrel. After the onset of conflict in Iran pushed WTI briefly above $100, this marked the first time since 2022 that the closing price had sustained above the $100 threshold.
Such volatility in financial markets has been especially pronounced in areas sensitive to inflation expectations and shifts in bond yields. Powell’s most recent remarks emphasized a patient approach to policy changes, with many interpreting his stance as signaling that a move to raise interest rates is not imminent.
“We may soon face questions about what steps to take next. For now, it’s not yet time to address them, as the full economic impact is still unclear,”
he explained, pointing to a reluctance to rush any near-term interest rate hikes.
The Federal Reserve’s cautious stance toward swift changes in oil prices has reinforced the sense that market uncertainty may persist for some time. At the same time, turbulence has been evident across stock and cryptocurrency markets, with investors paying close attention to any policy signals from the Fed as they weigh their next moves.
