With rising oil prices and rates, we are at last returning to normality

Oil prices hit $70 per barrel for the first time since  2014 this week

For financial markets, the new year has got off to an unsettling start. Government bond yields have risen sharply, and so too has the oil price, leading some commentators to declare that we are at a new inflection point, with trouble ahead in markets and the economy. Is this just another, mid-cyclical squall, of the type we have seen several times before in the current recovery phase, or does it presage something more fundamental and therefore worrying?

Start with oil. All of a sudden, more or less everyone has turned bullish on the world economy; demand is rising at a time when Opec, to almost universal surprise, has been relatively successful at keeping the lid on production. The other big factor underpinning a higher oil price is something I’ve written about before – the return of a geo-political risk premium, traditionally thought to be worth something like $10 a barrel on the price....

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