Treasury Warns of Oil Market Volatility, Commodity Index Exceeds 2022 Pandemic Peak
Oil prices have surged nearly 60% since the Iran conflict began and 80% since the start of 2026, driving broad commodity indexes above pandemic-era highs and forcing a hawkish repricing of global monetary policy.
Oil and Commodity Surge
For much of the period since the TBAC last met in early February, financial markets have been highly influenced by oil prices, which are up nearly 60% since the start off the Iran conflict, and nearly 80% since the start of 2026. With other commodity prices also rising, the broad commodity index is now above the pandemic-period high, set in 2022.
Global Rate Market Impact
The impact of the surge in commodities has been felt most acutely in global rates markets. Rates market sentiment heading into the conflict was that central bank policy rates would be unchanged or lower by end-2026. The increase in inflation expectations since the start of the war has now forced a significant hawkish repricing of central bank policy, most notably in Europe.
U.S. Economic Resilience
US equities have outperformed the rest of the world by nearly 10% since the start of March and have now reversed much of the underperformance witnessed at the start of 2026. Technology equities have led the way. Meanwhile, unlike Asia and Europe, the Iran conflict is a positive terms-of-trade shock for the US given its vast energy resources. Notably, US exports of energy products soared to record highs in the past two months.