(Bloomberg) — A spike in oil prices risks fanning wider moves across asset classes should inflation-sensitive investors believe the crude market will tighten further after OPEC+ failed to agree on a deal to increase production.

The surprise breakdown in talks means tighter supply conditions for crude and upward pressure on prices — at least in the near term — adding fuel to the wider inflationary concern that’s challenged central banks and roiled risk assets. futures rose above $77 for the first time since 2018 this week, sending global energy shares higher.

Benchmark 10-year Treasury yields ticked two basis points higher Tuesday, after reopening from a holiday, and the yield curve steepened.

“The rally neatly encapsulates the broader reflation narrative,” said Ilya Spivak, head of greater Asia at DailyFX. A renewed surge could amplify the Federal Reserve’s sense of urgency to tighten monetary policy, leading to a “broad risk-off turn that pulls down shares, oil and other sentiment-sensitive assets,” he said.

After several days of tense talks, OPEC and its allies abandoned their Monday meeting. A disagreement over how to measure production cuts upended a tentative deal to boost output and swiftly devolved into an unusually personal and public spat between Saudi Arabia and the UAE.

OPEC+ in Crisis as Specter of Harmful Infighting Looms Again

Still, the relatively modest reaction in other markets so far suggest investors are also cautious over the longer-term implications of the OPEC+ crisis. If the UAE were to leave the cartel, there is a risk producers would ramp up supply and ultimately send crude oil lower.

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