The Perfect Storm: Oil’s Spike, Japan’s Debt Shock, and Nvidia’s Quiet Bond Exit

Oil prices surged sharply after the US announced new strikes on southern Iran. Brent crude exceeded $92 per barrel, while WTI approached $90. Yields on 30-year Japanese government bonds (JGBs) surpassed 4.18%, and Nvidia exited the corporate bond market. How does this affect gold? Several explosions were reported near Bandar Abbas, Qeshm, and the Strait of Hormuz.

Two supertankers leaving the strait were hit by shells, immediately raising risks for the world’s most critical energy trade route. This event occurred just as markets began believing Iran-related energy risks were under control. Some trade flows had resumed, oil lost some geopolitical premium, and stock markets sought other income sources. The new US strikes are a stark reminder that nothing is settled. Iran’s president declared readiness for a ceasefire if Washington meets prior commitments, but the US resumed military operations. The prospect of limited strikes now raises the risk of periodic conflict rather than a true return to normalcy. But oil is only part of the issue.

The real tension stems from what we’ve tracked for weeks: refined products. The spread between US diesel prices just exceeded $100 per barrel. Refinery disruptions in the Gulf of Mexico combine with Ukrainian attacks on Russian plants, while global refining capacity was already under extreme strain. According to estimates, global refining volumes are roughly 7 million barrels per day below last year and nearly 6 million below seasonal norms since March. This metric is more critical than Brent at $92. Crude oil shortages push up oil prices. Refining capacity shortages drive diesel, gasoline, kerosene, and fuel oil prices much faster than crude itself. These products directly impact transport, agriculture, and logistics costs before being passed on to consumer goods.

Thus, this early-month shock came at the worst time for central banks. The Japanese Shock: 30-year JGB yields just exceeded 4.18%, an all-time high, and 10-year yields hit 3% for the first time since 1996. These figures seem normal for the US or Europe but are extraordinary for Japan. For nearly three decades, Japan anchored low global interest rates. The government refinanced massive debt at ultra-low rates, while Japanese banks, insurers, pension funds, and investors sought returns abroad, funding US Treasuries, European bonds, and global carry trades. This era is ending. Signals emerged from last week’s failed auction of 2-year Japanese bonds. Investors hesitated to buy despite expected rate hikes from the Bank of Japan. Now, yield increases spread across the curve. 10-year bonds at 3% and 30-year above 4% fundamentally alter risk-return calculations for Japanese investors. Why would a Japanese insurer take currency risk on US Treasuries when their own government offers around 4% on long-term bonds? The issue extends beyond Japanese Treasury purchases. For decades, the yen was a key funding currency for global leverage. As Japanese funding costs rise, some carry trades become less attractive. As JGB yields recover, fewer Japanese savings leave the country. When both trends occur simultaneously, a structural source of global liquidity contracts. Japan also faces fiscal challenges. With one of the largest public debts in the developed world, a few extra basis points aren’t immediately problematic since not all debt is refinanced at once. But each new issuance and maturing bond is gradually refinanced at higher rates. Japan’s Finance Ministry already forecasts a sharp rise in debt-servicing costs next fiscal year. This creates a particularly nasty situation: oil fuels global inflation while Japan raises the global duration premium.

These phenomena reinforce each other. Rising energy costs force central banks to maintain tight policies, which supports high financing costs. Higher government bond yields raise the hurdle rate for all leveraged investments. Government bond yields essentially benchmark most of the financial system. A company seeking a loan to build a data center must offer yields above sovereign debt. The higher this cost, the more profitable a project must be to justify investment. Projects profitable at 3% funding become unviable at 6% or 7%.

Nvidia exits the corporate bond market. In 2025, Nvidia held over $20 billion in corporate bonds in its investment portfolio. By early 2026, it still owned around $15 billion. But in the latest financial report, this category disappeared: Nvidia’s traded bond portfolio now consists mostly of Treasuries and US agency securities. This move shouldn’t be interpreted as expecting a credit crisis, nor are the sold bonds predominantly from non-cloud or AI-related companies. But the timing is interesting. Nvidia already carries enormous corporate risk elsewhere—direct investments in its ecosystem, extended payment terms to clients, and substantial guarantees for infrastructure projects aimed at acquiring its GPUs. Specifically, it provided a residual value guarantee of up to $105 billion for the OpenAI/SB Energy project in Ohio. Thus, it’s rational for its cash portfolio to be extremely liquid with minimal credit risk. Yet there’s a paradox. By protecting cash reserves from corporate credit, Nvidia removes a buyer from the market. $15 billion alone doesn’t shift balance in the US bond market. But if other investors follow Nvidia’s logic, consequences differ: reduced demand for corporate bonds means higher yields to absorb new issuance.

The industry that currently most needs the bond market is precisely the one on which Nvidia’s future growth depends. In the last quarter, hyperscale companies spent approximately $166 billion on capital expenditures, an increase of nearly 90% year-on-year. Meanwhile, Nvidia continues to deliver outstanding results, with over $96 billion in quarterly revenue, including $89 billion from data centers. Thus, there is no visible collapse in demand at present. However, the capital required to sustain this growth is increasing even faster. This is where Japan and oil become much more important to Nvidia than their absence from the company’s quarterly reports might suggest. The cost of the next data center is determined not only by the price of graphics processing units but also by electricity, diesel fuel for supply chains and backup systems, materials, construction, and, most importantly, the capital financing the project. This cost of capital can be simply stated as the sovereign rate plus the credit spread. As Japan contributes to rising global duration costs—since the energy crisis prevents central banks from lowering rates—the risk-free rate remains high. If investors simultaneously demand higher yields to finance AI-related infrastructure, the credit spread will also widen. This is the worst possible combination for the capital expenditure cycle. It is not necessarily that demand for artificial intelligence will collapse. Data centers may be filled, orders for GPUs may continue, and Nvidia may exceed expectations for several quarters. The cycle could begin to change long before these indicators deteriorate, simply because the expected return on the next project falls below the cost of capital needed to implement it. This is why Nvidia’s profit may become a lagging indicator of the cycle. It largely reflects investments where decisions were made and financing secured in the past. To understand future decisions, one should monitor government bond yields, corporate spreads, credit default swap spreads for heavily indebted companies, terms of new issues, and projects that hyperscalers may begin to reassess. Today, two of these variables have suddenly worsened. Japan is raising the global cost of capital, while oil prices limit central banks’ ability to reduce it. Finally, gold pieces begin to fit together. If oil prices continue to rise, central banks must pursue tighter policy to prevent a new wave of inflation. However, higher interest rates gradually undermine the massive volumes of public and private debt accumulated when borrowing was virtually free. Japan is now the most prominent example of this contradiction. Allowing rate increases protects the yen and fights inflation but increases the cost of refinancing huge public debt. Preventing rate increases protects the budget and financial balances but risks reigniting yen weakness and imported inflation. Japan is trapped. The yen has lost nearly 60% of its value over five years. To stop this depreciation permanently, the Bank of Japan would need to raise interest rates much more sharply. But with public debt exceeding 200% of GDP, it lacks the same freedom as other central banks: each rate hike gradually and significantly increases government refinancing costs. Meanwhile, government spending remains very high, and further tax breaks are being considered, putting additional pressure on the bond market. Japan may be tempted to artificially suppress yields by returning to a form of yield curve control, the famous YCC. But in that case, the yen would act as the adjusting variable: artificially suppressing yields amid high inflation and global interest rates would put additional downward pressure on the currency. This is precisely what Washington—and Scott Bessent in particular—seeks to avoid. Therefore, Japan must choose between raising interest rates, risking undermining public finances, or suppressing yields, risking further weakening the yen. In any case, the problem does not disappear; it merely moves to another area. This monetary and fiscal deadlock is beginning to be reflected in the dynamics of gold prices. When heavily indebted countries can no longer simultaneously protect their currency, contain interest rates, and finance budget deficits without resorting to intensified central bank interventions, gold once again becomes a monetary asset that is no one’s liability.