Brent crude above $100 and 10-year Treasury yields above 5% give markets a double test

This week has basically revolved around two questions for broader markets. The first being can oil prices keep below $100? And the second being can 10-year Treasury yields stay below the 5% mark? Today, we are starting to get an answer to both. And by the looks of it, neither is going in the direction that markets would have preferred. Brent crude is back above $102 after a push higher in overnight trading, while 10-year Treasury yields have broken through 5% to hit 5.11% - the highest since 2007. And the moves here definitely did not go unnoticed. Stocks fell in Wall Street, with the S&P 500 dropping by 0.8% and the Nasdaq falling by 1.1%. Earlier this week, I argued that the important thing wasn't simply whether Brent crude could trade below $100 but whether it could actually stay there. The brief drop into the high-$90s was centered around hopes of US-Iran diplomacy for the most part, helping to take some of the geopolitical premium out of crude. But that optimism is looking considerably more fragile now. There has been little tangible progress between the US and Iran, with Tehran maintaining their stance that it would not allow free passage through the Strait of Hormuz while US sanctions and the blockade remain in place. And until there is a genuine improvement in physical flows through the strait, it remains difficult for the oil market to confidently price out supply risk. It is essentially the kind of risk highlighted when Brent crude first slipped back below $100. That being a situation where encouraging headlines can knock the geopolitical premium lower very quickly, but it can come back just as fast when the underlying supply problem hasn't really gone away. While this is going on, the move in Treasury yields is perhaps even more interesting for broader markets. That makes it no longer just an oil story. Earlier this week, I asked the question of what catalyst might finally force 10-year yields decisively through 5%. Well, it seems like we're already getti