The price of the 10-year U.S. Treasury bond, the most heavily traded segment of the U.S. debt market, has seen its largest increase in two weeks. The sharp drop in international oil prices has significantly eased investors' concerns about rising U.S. inflation and the high inflation preventing the Federal Reserve from continuing to lower interest rates. The latest data shows that the yield on the 10-year U.S. Treasury bond, known as the "anchor of global asset pricing," which has been rising due to the cooling of rate cut bets and increasing inflation expectations, has significantly retreated from a two-and-a-half-month high, falling by 6 basis points to 4.06%, indicating an upward movement in bond prices.

At the same time, the yields on Treasury bonds of the same maturity in Germany and the United Kingdom have fallen by 6 basis points. Influenced by favorable consumer price data, the yield on Treasury bonds of the same maturity in Canada has also fallen sharply.

On Tuesday, the price of WTI crude oil futures, the benchmark for North American crude oil pricing, plummeted by more than 5%, falling below $70 per barrel. The price of Brent crude oil, the international benchmark for crude oil pricing, also fell nearly 5% on Tuesday and is currently hovering around $73.

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Previously, media reports suggested that the Israeli military might avoid targeting Iran's crude oil infrastructure as part of retaliation for a series of missiles fired at it earlier this month. More importantly, the International Energy Agency (IEA) stated on Tuesday that the global oil market will face a significant "supply surplus" situation in the new year, that is, in 2025.

On Monday, the Organization of the Petroleum Exporting Countries (OPEC) lowered its global oil demand growth forecast for this year and next for the third consecutive month. With OPEC's consecutive downward adjustments to the overall oil demand expectations, including crude oil and various refined petroleum products, OPEC seems to be inclined to abandon the organization's long-standing extremely optimistic forecasts for oil demand.

These two authoritative institutions in the energy sector's pessimistic reports on oil demand have undoubtedly dealt a heavy blow to crude oil price trends, thereby lowering market expectations for U.S. inflation. After all, energy price inflation has been a long-term driver of the rise in the U.S. Consumer Price Index (CPI) since 2022. Following a U.S. non-farm employment report earlier this month that showed strong wage growth and an unexpected surge in non-farm employment numbers, coupled with the U.S. Consumer Price Index (CPI) being slightly higher than expected, investors' concerns about U.S. inflation have also increased.

On October 10th in the United States, the overall CPI for September rose by only 2.4% year-on-year, the lowest since 2021, but higher than the 2.3% widely expected by economists. In Canada, the latest inflation data released on Tuesday showed that the September CPI increased by 1.6% year-on-year, a decrease that exceeded economists' expectations and was the lowest since February 2021.

As the situation in the Middle East escalates, investors have recently become increasingly worried about the resurgence of price pressures. The downward movement of oil prices has undoubtedly significantly alleviated investors' concerns about U.S. inflation.

Christoph Rieger, head of interest rate and credit research at Commerzbank AG, said: "Nowadays, it seems that traders are simply linking their trading machines to crude oil futures. Whether it makes sense to adjust their long-term inflation views in this context is another question."

In recent weeks, as Wall Street traders continue to track conflicts in the Middle East, crude oil prices have shown a "roller coaster trend." The Middle East accounts for about one-third of the global supply of crude oil and refined petroleum products. However, in the recent trading sessions, due to the continuous fermentation of the negative concern of "supply surplus," OPEC's latest report on Monday further reinforced traders' expectations of an imminent supply surplus in the oil market, and Brent crude oil prices have continued to be weak. On Tuesday, the IEA's forecast of an imminent supply surplus further hit Brent crude oil futures prices.