In the past three months, there has been a 40% increase in WTI crude oil prices, which has shown a strong correlation with the US 10-year Treasury yield. The rise in the US Treasury yield has caused global equities to experience a short-term downtrend since July 2023. Today, WTI crude oil futures opened in Asia with a 5% increase due to ongoing hostilities between Israel and Hamas. If WTI crude oil futures surpass a key resistance level of US$89.70/barrel, it could lead to further negative effects on global equities. The recent events in Israel, where the Israeli government declared war on Hamas, have caused concern over potential disruptions in oil supply, which could be used as a bargaining tool in the conflict. The rise in inflationary expectations has mirrored the increase in WTI crude oil prices. This rise in prices has also contributed to higher long-term US Treasury yields, further impacting global equities. The US 10-year Treasury yield is currently a primary factor in the short-term downtrend of global equities. If it reaches a major resistance level of 5.20%, it may create a challenging environment for equities due to higher funding costs. The US central bank is likely to maintain higher interest rates to combat these factors. Technical analysis suggests that WTI crude oil futures may experience another impulsive upward movement if it surpasses its key resistance level. The recent decline in prices is seen as a short-term downtrend within a medium-term uptrend. In today’s trading session, WTI crude oil futures opened above the 50-day moving average and experienced a 5.4% rally. If it continues to rise above the key resistance level of US$89.70/barrel, it may test the major resistance of US$105.00/barrel. The movement of WTI crude oil prices in the coming days and weeks will likely have an impact on the US Treasury yield and could lead to further effects on risk assets such as equities.
