Markets fell for three straight days as an oil shock pushed global yields to their highest since 2008.

A Wednesday rebound suggests investors are absorbing the shock rather than fleeing it. Oil, not AI, has driven this week.

The dominant driver has been direct US-Iran escalation.

WTI crossed 90 dollars Monday. Trump confirmed US strikes were retaliation for an attempted mining of Hormuz and an earlier attack on a base in Jordan.

Brent climbed above 92 dollars Tuesday after two tankers were struck by unknown projectiles in the strait, then rose to 95.32 Wednesday, its fourth gain in five days.

• Diesel hit its highest level in more than four months
• European natural gas reached its highest since 2023
• Global bond yields climbed to their highest since 2008

Markets are now pricing real disruption risk, not just rhetoric.

Rising energy costs pushed rate expectations higher.

Japanese bond yields hit their highest this century after Bessent urged the Bank of Japan to tighten amid yen weakness.

The US 10 year yield rose to 4.81 percent, its highest since late 2023, while 30 year yields held above 5 percent for their longest stretch since 2006.

Markets now price over 50 percent odds of a hike this month from four major central banks, with AI infrastructure spending adding to inflation pressure.

UK gilts underperformed, the dollar strengthened broadly, and gold fell to a two week low.

The equity reaction built, then reversed.

The S&P 500 fell 0.7 percent Monday on a chipmaker selloff, then Nasdaq 100 futures dropped 1.1 percent Tuesday as AI names came under pressure.

The MSCI Asia Pacific Index fell 2 percent to a one week low, and the World Index touched its lowest in almost a month.

That pattern broke on Wednesday. The S&P 500 paused its slump as valuations and Dell jumped 16 percent.

Trump said strikes on Iran would likely be short lived and stressed continued US control of the strait, while Treasury yields eased from multi year highs.

The Fed's Beige Book showed activity rising marginally over two months, led by data center demand.

Geopolitics → Oil → Inflation → Federal Reserve → Equity leadership

• Oil sits near 95 dollars with a real risk premium tied to strait security
• Global bond yields sit at their highest since 2008
• Over half the market expects a hike this month from major central banks
• Equities found buyers on valuation despite a strained macro backdrop
• AI infrastructure spending is adding to inflation pressure, not offsetting it

The oil shock has not resolved. It has just stopped getting worse for a day.

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