Crude futures jump 4.4% to $102.31 despite Hormuz rebound

10-year Treasury yield hits 24-year high, mortgage rates top 7%

Global crude futures rose 4.4% Thursday to $102.31 a barrel even as U.S. forces helped oil shipments through the Strait of Hormuz rebound toward prewar levels. The return of tanker traffic was expected to bring down the price of crude, gasoline and diesel, taming inflation and reducing the world’s borrowing costs — an outcome that has not materialized.

The 10-year Treasury yield, a rough proxy for interest rates on many types of loans, this week notched its highest level in 24 years, according to The Wall Street Journal. It ticked lower Thursday to 5.233%, fresh off its steepest one-quarter run-up since 1994, helping propel U.S. mortgage rates past 7%. Average U.S. gas prices tracked by AAA were hanging above $4.41 a gallon.

The factors keeping bond yields sticky stem from interlocking threats that are still squeezing the oil market. Houthi rebel attacks on shipping lanes and a Ukrainian air campaign targeting Russian refineries have pushed up the cost of moving crude and making fuel across the supply chain, raising the price to operate everything from cars and trucks to commercial jets and farming equipment.

“There is still a high degree of sensitivity in the markets now to whether there’s progress to some kind of formal agreement between the U.S. and Iran, to the potential for further disruption,” said Arend Kapteyn, global head of economics and strategy at UBS Investment Bank. “From a central bank perspective, you don’t just care about crude, but you care about the (refined) products, and the products are super tight.”

While the U.S. Navy has degraded Iran’s ability to attack tankers or nearby energy facilities, and Gulf oil producers and shipping firms have grown more adept at fending off or evading strikes, Morgan Stanley analysts estimate Middle East crude exports have recently been just 7% below prewar levels. With many tankers turning off tracking systems or transferring cargoes between ships to minimize threats, other analysts remain cautious about how much shipping has recovered. The flow data “could be a little optimistic, but it’s also not necessarily going to be consistent,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “It’s really opaque.”

Renewed strikes on regional shipping lanes by Iran or its Houthi proxies in Yemen are pushing traders to build more risk into their positions. On Wednesday, the U.K. Maritime Trade Operations Centre reported three vessels in the Strait of Hormuz were hit with projectiles. Drawdowns in inventories from China to Europe to the U.S., which buffered the market in the conflict’s first seven months, have left little room for error, and those stockpiles will need to be refilled.

The cost of physical oil cargoes remains elevated even as crude futures have retreated from recent highs, signaling that refiners are racing to lock in short-term supplies. North Sea dated crude, a benchmark reported by Argus Media to track on-the-spot deliveries, fetched $127.42 a barrel Thursday. “There’s clearly still this demand for these barrels regardless of what the numbers say is coming through [Hormuz],” Babin said.

While tanker traffic has rebounded, J.P. Morgan recently told clients, “The recovery, however, is uneven.” The bank estimates that exports of refined products such as gasoline, diesel and jet fuel from the region still remain around 40% below prewar levels. Tankers heading west from the Gulf have at times taken a long trip past the southern tip of Africa to avoid the threat of Houthi attacks, while some shipping firms carry oil out of the Gulf by shuttling supplies just outside Hormuz, where it can be transferred to vessels headed elsewhere. Those factors have tied up much of the global fleet of supertankers and sent freight rates surging: the roughly 21-day trip by skyscraper-sized vessels ferrying crude from the Middle East to China recently cost the equivalent of $35 a barrel, according to Argus, up from less than $7 the day before the war began.

Once crude reaches refiners, costs are snowballing further. With reduced capacity in the Middle East, as well as Ukrainian strikes on Russian refineries that pushed Moscow to curb diesel exports, traders are paying a premium to companies elsewhere that can pump out fuel. In New York, diesel futures have recently fetched roughly double the price of crude, with spreads far exceeding any previously recorded levels, boosting wholesale costs for gas stations.

Many energy executives expect the dynamic to persist. Forty-eight percent believe at least a year will pass before the spread between diesel prices and crude costs normalizes to 2025 levels, and roughly 36% said the same about gasoline, according to a Dallas Fed survey released this week.

Some companies’ plans to hedge against higher costs that they locked in early this year or after the war’s outset are ending, said Charlie Macnamara, head of U.S. Bank’s commodities team, leaving businesses such as farmers, home-improvement stores and truckers with a choice. “Do I lock in now? Or do I wait and hope that things get better?” Macnamara said. Higher prices now “will start to bleed into those hedging plans, and that will ultimately bleed into the end consumers.”

The bottlenecks are sending inflationary aftershocks across the U.S. that could extend beyond November’s midterm elections, pressuring the Federal Reserve to consider additional interest-rate hikes. President Trump has said he expects Tehran won’t make a deal until after the midterms; The Wall Street Journal reported that, privately, the president told aides he expects to resume bombing after Americans vote.

While energy prices remain painfully high, analysts believe they are not high enough to force a major slowdown in an economy fueled by the AI boom and a record-breaking stock market. “If economic resilience and investment demand remain intact, there may still be scope for yields to move higher,” said Seema Shah, chief global strategist at Principal Asset Management.