Oil, record yields, and AI: markets caught between war and the cost of capital

Between Saturday, September 26th, and Tuesday, September 29th, financial markets returned to action under pressure from an increasingly fragile equilibrium. The conflict between the United States and Iran brought oil back to the forefront, fueling inflation expectations and pushing bond yields higher again. The effect spread from energy to Treasuries, from equities to precious metals, while the technology sector continued to find a significant source of support in artificial intelligence.

Hormuz brings oil back to the center of the markets

The main catalyst came over the weekend, when US President Donald Trump rejected an Iranian proposal that would have included reopening the Strait of Hormuz. Diplomatic channels, however, remained active, with Qatari mediators engaged in separate talks with the two sides. This combination of escalation risks and negotiations has led to sharp swings in energy prices.

Brent crude briefly surpassed $107 a barrel , before scaling back its gains and closing at $105.28 on Monday. Pressure eased further on Tuesday, amid signs of improving Middle Eastern supply.

A significant boost came from Saudi Arabia, which resumed cargoes from the Red Sea port of Yanbu following the reactivation of the East-West Pipeline. Combined with increased flows from other regional producers, this boosted Middle Eastern exports to around 12.8 million barrels per day , offering a partial alternative to the logistical difficulties of the Strait of Hormuz. Brent crude thus returned to the $103 area, though remaining at very high levels.

The market therefore continues to treat oil not only as a raw material, but as the main variable capable of changing expectations about monetary policy.

Wall Street pays for the return of returns

The rise in energy prices has in fact reinforced fears that inflation could remain high for longer, further reducing central banks' room for expansionary monetary policies.

Wall Street reacted negatively on Monday: the S&P 500 lost 0.8% , the Nasdaq 0.9% , and the Dow Jones 0.7% . The move wasn't driven by a single sector, but by the rapidly increasing discount rate applied to stock valuations.

The 10-year Treasury note rose to around 5.25% , its highest level since 2007, while the 30-year note reached around 5.57% . The two-year yield, more sensitive to expectations about the Federal Reserve, also approached 4.94% .

This trend is significant because the bond market appears to be embedding a regime of structurally higher interest rates. Expensive energy, still-robust economic growth, and significant investments in artificial intelligence are making it more difficult to return to the monetary conditions that characterized much of the post-financial crisis years.

On Tuesday, the 10-year U.S. Treasury temporarily hit 5.278% , continuing to pressure equities. Even traditionally defensive sectors suffered, signaling that the main problem is no longer just geopolitical risk, but the overall cost of capital.

Europe is also rediscovering interest rate risk

The tension wasn't confined to the United States. The yield on the ten-year German Bund rose to around 3.64% , close to its highest level since 2009. In France, the ten-year bond rose to 4.74% , a level not seen since the global financial crisis.

For Europe, the combination is particularly delicate. The continent remains more exposed than the United States to imported energy shocks and simultaneously faces high public debt and less dynamic growth. Higher yields therefore mean higher refinancing costs for governments and tighter financial conditions for households and businesses.

American consumer confidence has also complicated the picture. The Conference Board's consumer confidence index fell to 81.9 points , its lowest level in over twelve years. This suggests that, while markets and central banks are still battling inflation, a segment of the real economy is beginning to more clearly feel the cumulative effect of high rates and prices.

Gold under pressure, despite uncertainty

One of the most interesting aspects of the period was the behavior of precious metals. Despite geopolitical risk, gold did not fully benefit from safe-haven demand. The simultaneous rise in the dollar and real yields prevailed.

The metal lost nearly 4% on Monday, falling to around $4,110 an ounce , before recovering some of its losses on Tuesday. Other sectors also remained weak: silver hovered around $60.8 , while platinum and palladium continued to be weighed down by strong bond yields.

The move confirms that, in a period of very high interest rates, even gold faces a significant opportunity cost: a Treasury bond above 5% becomes a much more credible competitor for global capital.

Artificial intelligence remains the exception

Within this restrictive scenario, technology has continued to demonstrate a notable ability to attract capital.

The new catalyst has been Anthropic. The prospects surrounding the company's future listing have rekindled interest in the entire artificial intelligence industry. Rumors indicate a possible valuation of more than $2 trillion , accompanied by an infrastructure investment plan of approximately $518 billion .

The reaction was immediate: the technology sector of the STOXX 600 rose by 2.5% on Tuesday, with semiconductors showing particular strength.

The contrast aptly sums up the current market environment. On the one hand, oil, inflation, and government debt are pushing ever-higher yields and compressing valuations. On the other, investments in artificial intelligence continue to support growth, earnings, and long-term expectations.

The result is a less uniform market than in previous years: it's no longer enough to distinguish between stocks and bonds. The real differentiator is becoming the ability of individual companies and sectors to generate sufficient growth to offset a cost of capital that, at least for now, continues to rise.