Risk Assets Rebound as Oil Spike Pressures Fed Rate-Cut Expectations

Bitcoin (BTC $67,928.90) and global equities steadied after an early-week selloff triggered by a spike in oil prices amid U.S.-Israel-Iran tensions. Bond markets remain cautious, with rising yields reflecting renewed inflation risks and reducing expectations for Federal Reserve rate cuts.

BTC climbed above $70,000 on Friday, up nearly 10% for the week, after briefly touching $74,000 midweek following a weekend drop to around $65,000. Equity futures mirrored the recovery, with S&P 500 contracts bouncing from a multi-week low of 6,718 points on Tuesday to about 6,840 points.

The initial selloff followed reports that Iran blocked tankers passing through the Strait of Hormuz, a critical route for global crude supplies. Markets stabilized after the U.S. offered naval escorts and political risk insurance for shipments.

Bond Market Signals Caution

The 10-year U.S. Treasury yield climbed from 3.93% to 4.15%, while the two-year yield rose from 3.37% to nearly 3.60%, highlighting tighter monetary policy expectations. CME Fed funds futures now price in less than a 50% chance of two 25-basis-point rate cuts this year, down from nearly 80% before the conflict.

“The rates market reflects the tension between a resilient economy and an energy-driven inflation shock,” said Bryan Tan, trader at Wintermute. Analysts note that oil shocks typically unfold gradually, with prices often rising 20–30% over ~60 days as supply disruptions affect inventories.

Strong U.S. economic data have also contributed to rising yields. The ISM services index hit 56.1 in February, while ADP private payrolls added 63,000 jobs—the strongest reading since July 2025. Market focus now turns to Friday’s nonfarm payrolls and wage growth figures, which could further shape Fed expectations and market volatility.