Oil prices surged to over $111 per barrel at the start of the week, driven by escalating tensions in the Middle East, while stock futures in both Europe and the U.S. pointed to a lower open. The rise in oil prices raises inflation concerns, which could pressure consumer sentiment and corporate earnings. Amidst this backdrop, UK bond markets showed signs of stabilization as Manchester Mayor Andy Burnham pledged adherence to fiscal rules, potentially alleviating some investor jitters.

The UK’s 10-year Gilt yield surged to its highest level since 2008 last week, but Burnham’s commitment to fiscal stability may help yields recover. Meanwhile, U.S. Treasury yields have also climbed, raising concerns among investors about the sustainability of recent stock market gains, particularly as the S&P 500 approaches record highs with a narrow breadth of participation.

As oil prices remain a focal point for inflation, market professionals should monitor the interplay between energy prices and consumer sentiment. Additionally, upcoming earnings reports, particularly from Nvidia, will be crucial for assessing the health of the tech sector and its broader implications for market stability.

Source: xtb.com