Rising Oil Prices Are Wreaking Havoc Across the Market Market Analysis by covering: S&P 500, Crude Oil WTI Futures, Cboe 1-Day Volatility Index. Read 's Market Analysis on Investing.com Gold prices rise with Iran deescalation in focus; set for bruising March lossesfinished lower on Monday by approximately 40 bps, despite starting up nearly 80 bps. The index was driven higher early by a sharp volatility reset, with thefalling from a close of 34 to around 16 at the open. Once that volatility crush faded, equities had little support and drifted lower. It’s not that volatility isn’t low enough to push the market higher; it’s that there is very little positive vanna left. Most positioning above the spot is negative vanna, so there’s no meaningful re-hedging flow to support further upside. Once oil prices began rising, selling followed.rose above $102, triggering a breakout toward $105. Based on resistance levels dating back to 2022, oil could continue higher, potentially toward $112. Ultimately, oil remains in the driver’s seat, and it continues to weigh on equities. More importantly, it is tightening financial conditions across the broader market complex—a process that is likely to persist as long as oil continues to rise.Five-year, five-year forward breakeven inflation expectations are falling, while 5-year CPI swaps are rising. Typically, these measures move together, but that relationship has broken down. The 5-year CPI swap is moving higher, the 5y5y breakeven is falling, and the 10-year CPI is drifting modestly higher. I generally avoid relying heavily on breakevens because they can be noisy. Taken at face value, the move might suggest rising disinflation expectations—but that interpretation is likely misleading. The decline in the 5y5y forward appears to be driven less by falling inflation expectations and more by rising real yields. In particular, the 10-year real yield is rising faster than the 5-year real yield, implying the market is pricing tighter financial conditions and higher real rates further out the curve. We saw a similar dynamic in 2022, when 5y5y breakevens fell sharply as real yields surged. That episode suggests breakevens can give a false signal, appearing to point to disinflation when the real driver is tightening via higher real rates. When you factor in the recent surge in oil, the picture becomes clearer. Inflation pressure is building at the front end, but rising real yields are offsetting that impulse in breakevens. This divergence is likely a function of real rate dynamics, liquidity conditions in the TIPS market, and a lag in repricing.Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks. Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes.and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website. It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.