The oil market's abrupt surge is becoming a genuine headache

If Trump wants to stop the Federal Reserve from raising rates twice before year-end, he has the means to do so — and that is the good news. The tool is neither legal threats nor intimidation but ending the Iran war.

For months, oil has kept defying analysts by withstanding lost supplies, but the rules of supply and demand have not been repealed. The drawdown of strategic reserves and, in particular, subdued Chinese demand held prices in check; that restraint now looks to be ending. China is back in the market, and there just isn't enough crude to meet demand.

Fresh signs of a scramble for barrels are emerging, with Brent and WTI both up 6% on a ninth straight day of gains. Brent now sits at its strongest level since May.

The ongoing climb in energy costs is setting up an ugly September consumer-price index reading and adding to political pain. While the Fed has at times described oil-led inflation as temporary, Trump said yesterday he expected the war to end after the midterms — a view that partly triggered the rally — and advisers have reportedly discussed this week keeping the war going until after his term.

If there is any good news, it is that the oil spike gives Trump a solid reason to return to the negotiating position. The bad news is that if oil prices force him back, he will be negotiating from a weak hand.

For central banks, this is a severe headache, and the bond market is offering scant relief today. The US 10-year yield has climbed 11 basis points on the day to 4.94%, leaving it dangerously close to the 5% threshold that no one wants to approach.