Oil Hits $100 as Fed’s Inflation Victory Lap Gets Interrupted

Oil’s surge back above $100 overnight — despite strategic reserve releases and reassuring Fed speeches — just shattered the neat little narrative that inflation was finally under control. Iran’s escalating shipping attacks in the Persian Gulf sent WTI crude up another 8% to $101.20, erasing weeks of careful central bank messaging in a matter of hours.

Here’s the uncomfortable truth bond markets are starting to price in: the Fed’s 2% inflation target was never about energy prices cooperating forever. Core CPI at 2.16% looked perfect last month, but that math assumed oil would stay well-behaved around $75. Now crude is 35% higher than its February average, and every dollar above $90 adds roughly 0.1 percentage points to headline inflation over the next three months. Denmark telling citizens to avoid driving isn’t just dramatic — it’s a preview of how quickly energy shocks can flip consumer behavior.

The 10-year Treasury’s climb to 4.15% tells you bond investors already see the math changing. That’s a 23 basis point move in just two weeks, and it’s happening while the 2-year sits relatively calm at 3.57%. This isn’t about Fed policy uncertainty — it’s about inflation uncertainty. When long-term bonds sell off faster than short-term ones, the market is pricing in persistent price pressures, not temporary spikes.