04.08.2026 - Talking down Yields and Oil Prices
Short-term headlines once again became the main market driver.
Markets rallied after US Treasury Secretary Scott Bessent said in an interview with CNBC that "we are in talks with the Iranians," adding that "there is a chance we may have a deal today or tomorrow to open the Strait and move towards a more normalized position in this conflict."
The comments immediately fueled hopes of a de-escalation in the Middle East. Oil prices dropped sharply, while US Treasury yields also moved lower as investors priced in reduced inflation risks.
The prospect of lower yields provided another boost for the AI trade, helping technology stocks outperform.
Markets:
Equities: Global markets traded higher, with U.S. equities leading the gains. Technology stocks outperformed, lifting the Nasdaq by around 2.5%.
Bonds: US lower while Japan government bond yields continue to rise - US 10y yield above 4.64%, Japan 10y yield 2.86%
Commodities: Oil prices fell sharply on market noise, WTI around USD 76/barrel and Brent around USD 80/barrel
Precious metals prices advance, gold above USD 4’075/oz, silver trades above USD 59/oz
Currencies: no major moves, Japanese Yen weakens again after latest intervention, USDJPY 157
Cryptos: no significant moves - Bitcoin at USD 63k
Volatility: The VIX index almost unchanged at 16 (god hedging level)
My View: Markets continue to react aggressively to every headline coming out of Washington.
The question is: why?
Over recent months, investors have repeatedly priced in optimistic geopolitical headlines, only to reverse those moves once reality failed to match the rhetoric. Yet every new statement seems to trigger the same response.
From Washington's perspective, there are strong incentives to encourage lower oil prices and lower bond yields.
Higher oil prices risk pushing inflation higher again. At the same time, higher Treasury yields would make refinancing an already enormous US debt burden even more expensive. With federal debt now exceeding USD 40 trillion, every increase in interest rates and yields carries significant fiscal consequences.
The government therefore has every reason to prefer lower yields and calmer markets.
Meanwhile, the behavior in technology stocks has become increasingly extreme. Seeing some of the world's largest companies gain well into double digits within a single trading session is not a sign of a normally functioning market. It reflects exceptionally aggressive positioning rather than fundamental value creation.
Retail investors continue to pour leveraged money into equities at a pace reminiscent of previous speculative peaks. Similar behavior was observed during the Dot-com bubble and again before the Global Financial Crisis. History never repeats perfectly, but excessive leverage and momentum-driven buying tend to follow familiar patterns.
Nothing fundamental has changed.
The geopolitical situation remains highly uncertain, fiscal challenges continue to grow, and valuation concerns in parts of the AI sector have not disappeared.
Today's rally looks less like a reassessment of fundamentals and more like another wave of FOMO-driven momentum.
Eventually, markets will have to distinguish between headlines and reality. Until then, volatility is likely to remain elevated beneath the surface, even if headline indices continue pushing higher.
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