Global markets remained volatile on Friday as oil prices eased, while bond markets continued to reflect investor anxiety over rising inflation risks linked to the ongoing Middle East conflict.
Brent crude fell about 3% to around $105 per barrel, while US crude dropped more than 2% to near $94. The pullback followed efforts by major economies, including members of the Group of Seven, to stabilise energy supply routes such as the Strait of Hormuz. However, prices remain elevated, having surged over 40% this month amid the United States and Israel conflict with Iran.
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Central banks have intensified concerns by warning that the energy shock could fuel persistent inflation. Investors are now reassessing expectations, with markets no longer pricing in a rate cut from the Federal Reserve this year. Meanwhile, the Bank of England may consider a rate hike as early as next month, while the European Central Bank is expected to debate tightening policy in the coming months.
The bond market has reacted sharply, with yields on short-term government debt in the US, Germany and the UK rising to multi-month highs. Analysts say the longer the conflict drags on, the greater the risk of aggressive monetary tightening globally.
Despite the turbulence, equity markets showed some resilience. Asia-Pacific shares edged higher, while futures tied to major US and European indices also gained modestly.
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Currency markets reflected shifting expectations, with the US dollar weakening as traders priced in relatively tighter policies from other central banks. The euro and British pound posted gains, while the Japanese yen recovered slightly after recent losses.
Gold prices also climbed, highlighting ongoing demand for safe-haven assets as geopolitical tensions and economic uncertainty persist.