Oil's Retreat on Diplomatic Hopes Pulls Treasury Yields Lower

West Texas Intermediate crude pulled back as diplomatic developments reduced the geopolitical premium that had been built into oil prices, according to Seeking Alpha. Treasury yields fell alongside the drop in oil, a move Investing.com linked directly to the retreat in crude alongside an ongoing debate over stock buybacks. The two moves are connected: lower oil prices ease one source of inflation pressure, which in turn can lower the yields investors demand on government bonds. That comes even as sources tell Investing.com the European Central Bank is still set to raise rates in September, with policymakers reportedly showing little appetite to signal further hikes beyond that move, despite concerns tied to the Iran conflict. The tension between falling oil-driven inflation pressure and a central bank still leaning toward tightening leaves the near-term rate path unsettled. It is not yet clear whether easing geopolitical risk will be enough to change the ECB's calculus if the diplomatic progress in the Middle East proves durable.