Markets are waking up to a rough start this morning as oil prices surge nearly 5% following reports that Iran has halted negotiations amid the expanded ground assault in Lebanon.

Adding to the tension, the U.S. and Iran exchanged strikes over the weekend, reminding investors just how fragile the current situation remains. While optimism for a diplomatic resolution still exists, it’s hanging by a thread.

The bond market is reacting accordingly. Higher oil prices increase inflation concerns, and inflation is never a friend to lower interest rates.

Adding another layer to the story, Exxon recently warned that oil prices could move significantly higher, potentially reaching $150 per barrel. Thus far, global inventories have helped absorb much of the supply shock.

As those inventories are drawn down, the cushion becomes smaller and upward pressure on prices grows.

For now, the market remains focused on one thing: stability. Until there is a clear path toward de-escalation and energy prices begin to normalize, volatility in stocks, bonds, and mortgage rates is likely to remain elevated.

Jobs reports all week. lets see what happens and if we can hold onto all the gains from the last week.

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