What rising oil prices mean for gilt yields

 
Lale Akoner, eToro global market strategist, says:Gilt yields are sending a clear message, oil matters more than growth right now. Markets are looking past softer economic data and focusing instead on the risk that higher energy prices will keep inflation pressures alive. The latest escalation in the Middle East has pushed crude sharply higher, with Brent trading near the mid-to-high $90s. That raises a familiar problem for bond investors, an external energy shock that hurts growth but also makes it harder for central banks to cut rates.

For investors, the key point is that gilts are no longer trading simply on growth outlook. They are reacting to global inflation risk, and as long as oil stays elevated, yields are likely to remain under continued upward pressure. The bond market’s message is clear; energy prices are very much back in control of the narrative.”