Oil Remains the Key Risk for Global Markets as Iran Conflict Threatens Another Shock

Oil prices have become a central driver of global market sentiment since the reported escalation of the US-Iran conflict on February 27, according to one market assessment.
The argument is that another sharp increase in crude prices could trigger a broader flight toward defensive assets, strengthening the US dollar while putting pressure on gold, silver and vulnerable European markets, including France.
A particularly important part of this outlook concerns US Treasury bonds. The analysis suggests that the 10-year Treasury yield could fall during another escalation as investors seek safety and become more concerned about economic growth.
That outcome is not guaranteed. An oil shock could also raise inflation expectations and put upward pressure on bond yields, depending on which force dominates market pricing.
The competing effects of inflation, growth fears and safe-haven demand make the next major move in oil especially important for currencies, bonds and equities.