Inflation Fears Send Interest Rates Soaring: 4 Key Sectors to Watch

Interest rates could still rise in September due to various factors, including the Iran conflict's impact on crude oil prices and production costs. This energy shock has driven inflation higher, with the Consumer Price Index (CPI) rising to 3.8% earlier this summer - its sharpest increase in three years and well above the Federal Reserve's 2% target.

The resulting demand for higher rates by lenders and investors selling bonds amid rising inflation concerns have lifted Treasury yields to their highest levels since 2007. With mortgage rates based on the 10-year Treasury yield plus a risk premium, they too have risen to their highest levels since summer 2025.

On the fiscal side, federal interest payments on government T-bills, notes, and bonds now exceed spending on Medicaid, national defense, and all non-defense discretionary programs combined. This adds further upward pressure on long-term borrowing costs.