Oil prices have stalled their breakout attempt after President Trump postponed the planned Iran attack and extended Russia sanction waivers, marking a significant reversal from earlier gains. According to reports from Investing.com India, oil looked poised to break out on Monday but could not clear the trendline, with at least for now, oil bulls will have to wait and see if the market can gather enough momentum to finally push through. From a fundamental standpoint, there are plenty of reasons for oil to break out, but for some reason, it keeps getting stuck beneath resistance. The sudden reversal in oil prices has shifted momentum across the broader market, with the S&P 500 rallying by nearly 70 basis points in the final hour of trading, leaving the index down just 7 basis points on the day.
Global government bonds extended their selloff on Monday as rising energy prices due to the Iran war fanned inflation fears and stoked investor wagers on rate hikes from central banks around the world. Benchmark 10-year U.S. Treasury yields jumped as much as 3.6 basis points to 4.631%, their highest since February 2025, having climbed more than 20 basis points last week. The two-year yield touched a 14-month top of 4.105%, while the 30-year U.S. Treasury yield rose to a one-year high of 5.159%. All three yields were trading just below those highs by mid-morning in Europe, still enough to cast a shadow over stock markets that have surged on AI enthusiasm. The bond selloff came as investors are beginning to fret about the economic fallout from the conflict, fearing high energy prices will spill over into broader price rises and require central banks to raise interest rates. Markets are now pricing in a more than 50% chance the Federal Reserve will raise rates by December to combat the rise in inflation, a dramatic shift from before the war when investors had seen the Fed cutting rates this year.
The sudden reversal in oil prices has created significant volatility across equity markets, with the CBOE Volatility Index (VIX) yet to capitulate despite the broader market rally. As reported by Investing.com India, the MOVE Index saw a significant gain on Monday, rising to 86, representing a substantial move over just two days, climbing from 69 to 86. This volatility surge has helped the ratio of oil volatility to bond market volatility contract somewhat, and based on the moves over the past two days, the oil market's view may now be winning. The irony is that the S&P 500 had actually fallen below its 10-day exponential moving average, but support in the index held, and ultimately, that is what matters. Whether the index can survive today is another question, with roughly $40 billion in Treasury bill settlements scheduled that could add to market uncertainty.
Euro zone bonds were also under pressure, with Germany's 10-year yield hitting a 15-year top of 3.193%, extending last week's 14 basis point gain. Markets see an 80% chance the European Central Bank will raise interest rates next month and are pricing three such moves by year-end, a dramatic shift from before the war when the ECB was expected to remain on hold this year. Hong Kong's Hang Seng lost 1.1% to 25,675.18, while Australia's S&P/ASX 200 declined 1.5% to 8,505.30. In early European trading, France's CAC 40 lost 0.9% to 7,883.42 and Germany's DAX dropped 0.1% to 23,925.82, while Britain's FTSE 100 edged up 0.1% to 10,205.31. The bond rout followed a steep selloff last week as investors were spooked by hotter-than-expected inflation figures globally, particularly in the United States, with data showing U.S. consumer and producer prices surged in April, with similar readings seen in China, Germany and Japan.
Oil continues to be guided higher by the 50 SMA, forming a series of higher lows and signalling that bulls are buying the dips. As reported by Investing.com India, the price recovered from a recent low of 97.20 at the 50 SMA, rising back above 100 and has extended those gains to test 104.30, close to the 23.6% Fibonacci retracement of the 55–120 move at 105.00. The RSI is also rising, which, combined with the hold above the 50 SMA, keeps buyers hopeful of further upside. Buyers will look for a move above 105 to bring 111 into focus, the April 30 high, above which attention turns to 120, the 2026 peak. However, sellers could be encouraged by the long upper wick on today's candle, with immediate support at 100. A break below 100 exposes the 50 SMA at 97.20, while below that, 95 comes into focus, marking the 38.2% Fibonacci level, beneath which sellers will turn their attention to the 50% Fibonacci level at 88.00.
