A rapid climb in oil prices alongside escalating geopolitical tensions is stoking fresh inflation concerns, even as traditional safe-haven assets begin to falter.
Until recently, the market narrative around U.S. monetary policy was centered on the extent of Federal Reserve rate cuts expected in 2026. That view is now being challenged. With the economy showing only limited signs of cooling, inflation still above the Fed’s 2% target, and oil prices surging 50% in just three weeks, traders are increasingly factoring in the risk of a rate hike as soon as April.
CME FedWatch data reflects this shift, with the probability of a rate increase at the upcoming Fed meeting rising to 12% from 0% just a week ago. This marks a sharp reversal from sentiment two months ago, when markets were leaning toward a rate cut during the same timeframe.
Inflation data from February adds context to the evolving outlook. Headline inflation came in at 2.4% year-over-year, while core inflation stood at 2.5%—both recorded before the escalation of the Iran conflict and the subsequent spike in oil prices.
Bond markets have responded with a broad sell-off. The U.S. 10-year Treasury yield climbed another 10 basis points on Friday to 4.38%, up from below 4% at the start of March. The pressure is global: in the U.K., 10-year gilt yields have jumped above 5%, rising 15% over the past month to their highest level since 2008.
Equities have so far avoided sharp declines, but weakness is becoming more apparent. The S&P 500 dropped 0.9% on Friday, setting it on course for a fourth consecutive weekly loss and leaving it down more than 5% since late February. The Nasdaq has followed suit, falling 1.2% on the day.
Meanwhile, precious metals—which rallied strongly ahead of the geopolitical escalation—are now reversing course. Gold has fallen from around $5,500 per ounce at the start of the month to $4,569, while silver has declined from $95 to $69.50 per ounce.
Amid this backdrop, Bitcoin is standing out. Andre Dragosch, European Head of Research at Bitwise, noted that the cryptocurrency is once again acting as a “canary in the macro coal mine,” suggesting it may already be reflecting recession risks that traditional assets have yet to fully price in.
Holding near $70,000, Bitcoin has posted modest gains since early March and remains one of the strongest-performing assets since geopolitical tensions began to intensify.
