Brent tops $100 and Treasury yields hit a three-year high

Good morning. Brent crude topped $100 a barrel last night for the first time since July. US forces sank five Iranian tankers near Kharg Island, Iran's main export hub, and the Revolutionary Guard claimed retaliation, ratcheting up the tension.

Pricier oil lifts inflation, and that raises the odds of a Fed hike. The chance of a September increase rose to 62%, and US Treasury yields climbed to their highest since 2023. The Treasury announced a $6 billion bond buyback, three times the usual size, but the market judged it too small. Even when the government leans against rising yields, markets are not following.

Stocks took the pressure. The Dow lost 405 points, or 0.77%, for a third straight decline and slipped below its 50-day moving average, a closely watched short-term trend line. Others point to history, noting that stocks tend to recover after hikes, so the bull market is not necessarily over.

Meanwhile the US-Canada trade fight widened. Washington will ban imports of Canadian alcohol, dairy and motorcycles starting later this month. Today the focus is on how prices look at the wholesale level.