Oil reserves, rising rates, and politics: Markets are back under pressure.

Between September 5th and 8th, financial markets had to absorb an uncomfortable combination: geopolitical tensions in the Middle East, high energy prices, rising bond yields, and macroeconomic data that, rather than offering relief, reinforced the idea of continued restrictive central banks. The result was a market less willing to pay high multiples on equities and more sensitive to any signs of inflation.

Oil and reserves: energy risk returns to the forefront

The energy issue remains the main channel of communication between geopolitics and markets. Crude oil exports from the Middle East have fallen to around 11 million barrels per day , down from around 18 million before the war. This is a significant decline, but it has not yet pushed Brent crude consistently above $100 : alternative routes, increased production from the United States, Canada, and Guyana, and less dynamic Chinese demand have so far limited the upside.

The physical market, however, remains tense, and there's a risk that a broader disruption in supplies could trigger a new price shock. In this context, the situation of US strategic reserves is also particularly significant. The Strategic Petroleum Reserve has fallen to 285.4 million barrels , the lowest level since 1982. This isn't a market-moving figure on its own, but it does reduce the perception of a readily available buffer in the event of a further deterioration in global supply.

The return of the bond market

If oil is the spark, rates are the channel through which risk is transferred to nearly all asset classes. The 10-year U.S. Treasury yield has returned to around 4.8% , approaching the psychological threshold of 5% . The movement reflects both rising inflation expectations and the resilience of the U.S. economy, which makes rapid monetary easing more difficult to justify.

Fed Funds futures now incorporate a roughly 58% probability of a hike at the next Federal Reserve meeting. For stocks, especially growth and technology sectors, this means a higher discount rate and therefore greater pressure on valuations.

The tension isn't limited to the United States. In the United Kingdom, the Treasury placed 30-year debt at a yield of 5.8168% , the highest recorded at an auction or syndication since comparable data from the Debt Management Office began. Demand remained robust, but the message is clear: financing public debt is increasingly expensive, narrowing fiscal space just as governments and businesses face higher energy costs.

Japan: The End of Nearly Free Money

Japan has also become central to global repricing. The market assigns about a 97% probability to a rate hike by the Bank of Japan, which would take the benchmark to 1.25% . The prospect of higher domestic yields has strengthened the yen and increased the risk of a dismantling of carry trades financed in the Japanese currency.

This is an important step because for years, Japan has been a major source of cheap capital for the global financial system. A more rapid normalization of the BOJ could therefore have consequences that extend far beyond the Japanese market, affecting bonds, currencies, and international stocks. The upward revision of Japanese growth and the improvement in real wages have further strengthened this outlook.

Stocks under pressure, but not uniformly

Wall Street's reopening after the long weekend immediately revealed investors' sensitivity to the new macroeconomic mix. In early trading Tuesday, the Dow Jones fell about 1.2% , while the S&P 500 and Nasdaq fell around 0.5% . It's not just geopolitical fears: the problem for stocks is the combination of expensive energy and high yields, which is simultaneously compressing corporate margins and valuations.

In Europe, the situation was more subdued but equally fragile. The STOXX 600 remained under pressure, while energy stocks benefited from oil. Complicating the German situation was the election result in Saxony-Anhalt, where AfD garnered around 44% of the vote . The immediate financial impact is limited, but the party's growth increases uncertainty about economic reforms and the political stability of Europe's largest economy.

The indexes' reaction therefore shows a market that isn't just pricing in the risk of an economic slowdown. The real variable is the sustainability of valuations in the presence of bond yields much higher than in the years of near-zero-cost money. Even companies with solid fundamentals become more vulnerable when the risk-free yield becomes competitive again.

Europe and China: Growth Doesn't Reassure Central Banks

On the macroeconomic front, the eurozone showed better-than-expected signs: second-quarter GDP grew 0.6% quarter-over-quarter and 1.2% year-over-year . Under normal circumstances, this would be clearly positive news for stocks. At this stage, however, more resilient growth combined with high energy prices reinforces the idea that the ECB has room to maintain a restrictive policy stance.

Strong trade figures also came from China. Exports in August increased 25% year-over-year , and the monthly trade surplus reached $119.1 billion , thanks largely to international demand for high-tech products, semiconductors, electric vehicles, and artificial intelligence components. Strong exports support Beijing, but also highlight a still-significant dependence on foreign demand and risk fueling new trade tensions with the United States and Europe.

A market with less margin for error

The picture that emerged during this period was not of a global economy in recession, but of a system that must cope with still modest growth, energy inflation, and rising capital costs. It is precisely this combination that makes the market more vulnerable.

As long as oil and yields remain high, equities will face increasingly difficult-to-sustain valuations. Meanwhile, the potential tightening of the BOJ and European political tensions add new levels of volatility. The market's message is therefore less of an impending crisis and more of a structural return of the risk premium: more expensive capital, greater selectivity, and less room to ignore geopolitics and monetary policy .