Trump's Iran Stance Lifts Oil, Hammers Treasuries and Bunds

Oil Surge and Fed Premium Deliver a Double Blow to Global Rates

On 12 November, Treasuries sold off sharply after President Trump indicated no deal was required with Iran, and crude prices rose. The move in oil coincided with the EIA reporting a US crude inventory build of 4.7 million barrels against a consensus expectation for a draw.

The selloff in Treasuries was not purely about oil. Fed rate-hike premium built further through the session, reinforcing the pressure on the long end. The 30-year auction that day cleared at a high yield of 5.441% with a bid-to-cover of 2.36, below the recent average of 2.44. The dollar strengthened broadly as yields rose.

The contagion moved into European rates. The 10-year Bund yield climbed to 3.35%, up three basis points on the day. Gilts also came under pressure. Separately, Gulf tanker incidents and strength in European natural gas added to the unease in European fixed income, with energy-driven inflation concerns layering on top of the rates move already under way.

For traders at the European pre-open on 13 November, the setup is one of continued pressure on duration. The combination of higher crude, a broadly stronger dollar, and a weak Treasury auction leaves little near-term relief for Bunds or gilts. Sterling and the euro both face headwinds from a firmer dollar, though the two currencies carry different domestic stories into the session.

Domestic Pressures Compound the Global Rates Selloff

The Fed backdrop sharpens the rates picture. October CPI printed above forecasts for both the headline and core readings, marking a third consecutive elevated core month. A 25 basis point December hike is fully priced in OIS markets, and any further upside data surprise raises the risk of a larger move — a scenario that would extend Treasury weakness and dollar strength.

In the UK, Q3 GDP grew at its strongest annual pace since late 2024, with services output leading the expansion. The solid print reinforces the case for further Bank of England tightening, keeping front-end gilt yields supported even as the long end faces selling pressure from the global rates move.

German gas storage sits at its lowest level for this point in the year since 2011, with EU-wide inventories well below their long-run median. TTF has been supported by colder weather and Iran-related headlines, and tight storage skews the risk toward further gas price strength on any supply disruption — adding an inflation channel that bears directly on European bond markets.

Rating Reviews and Sovereign Spread Risk Into the Weekend

The most immediate catalyst is the scheduled sovereign rating reviews for Germany, Italy and the UK, due after the close on 13 November. Any negative outlook change on Italy could widen the BTP-Bund spread materially at Monday's open, while affirmations would likely pass without significant market reaction. Analysis suggests the Italy-Bund spread looks tight relative to Italy's fiscal position, making a negative surprise the asymmetric risk.

Beyond tonight, the ECB is scheduled to decide on rates on 17 December, with a 25 basis point hike to 2.75% the near-unanimous expectation in a Reuters poll. Guidance on the path beyond December — particularly any signal of a pause — could drive significant moves in euro front-end yields and the single currency. The Fed's own December meeting is scheduled for 9 December.