Rates Spark: Oil Is Rising, and Markets Cannot Ignore It Forever

ING’s latest rates strategy note argues equity markets remain complacent, while bond markets are already repricing the inflationary consequences of higher oil and a prolonged Hormuz disruption. 

• With Brent back above $100, ING sees both the ECB and BoE hiking at least twice this year if prices stay elevated.
• A move to $110 oil could push 2Y EUR swaps to 3.0%, 2Y GBP above 4.4%, and the U.S. 10-year above 4.5%.
• ING notes equities are still near highs, but warns that every extra day of disruption raises the chance of a sharp risk-off reversal.
• Food inflation via fertilizer costs is flagged as a second-round risk.

Something may have to give: either energy stress eases—or markets force policymakers to respond.