Oil Prices Fall Back to Pre-Iran Conflict Levels as Treasury Yields Decline in Tandem
Claire Weston
Brent crude fell to $75.79 a barrel — back to the price on the eve of the U.S.-Israel war against Iran; long-end Treasury yields dipped in tandem as markets bet inflation pressure is easing, but Thursday's PCE reading will test how far this optimism can run.
How far did oil fall, and why "pre-war"?
Brent futures dropped 1.7% Wednesday to $75.79 a barrel, the lowest since February 27 — the day before the U.S.-Israeli campaign against Iran began.
WTI futures fell 1.7% in lockstep, settling at $71.98 a barrel.
This means → the war premium — the extra price the market charged for conflict risk — has been virtually erased.
What changed in the Strait of Hormuz?
IMO Secretary-General Arsenio Dominguez said his agency had received the necessary safety guarantees and completed a full verification of navigation conditions.
More than 11,000 seafarers stranded in the Persian Gulf are set to transit the Strait of Hormuz as security arrangements take hold.
In plain terms = the world's most critical oil-shipping chokepoint is reopening, and the biggest supply-side uncertainty is fading.
Why did Treasury yields move in tandem?
The 10-year Treasury yield slipped more than 1 basis point to 4.479%; the 30-year yield fell by a similar margin to 4.922%.
The 2-year yield held steady at 4.193% — the short end didn't budge while the long end dipped, signaling that markets are adjusting inflation expectations, not rate-hike bets.
This means → cheaper oil feeds directly into lower inflation expectations, and investors are willing to accept a thinner long-term return.
What comes next?
Thursday brings the May Personal Consumption Expenditures (PCE) price index — the Fed's preferred inflation gauge.
FactSet's economist survey forecasts that core PCE — stripping out food and energy — will tick higher month-on-month versus April.
This reflects a tension: oil is cooling, but core prices may be heating up. The actual PCE print will determine whether the current dip in Treasury yields can hold.
Content is for reference only, not financial advice.