Middle East Conflict Sends US Market into High Alert as Oil Prices Soar

The US market is on high alert as the conflict in the Middle East escalates. The recent drone attack that originated in Iraq has led to Saudi Arabia shutting down its East-West pipeline, which accounts for 4% to 5% of global oil supply.

Oil prices have surged past $100 a barrel, causing concerns about inflationary pressures on the economy. This could lead to a prolonged Federal Reserve rate-hiking cycle, with yields on the 10-year US Treasury bond and comparable TIPS yield rising to nearly 5.00% and 2.60%, respectively.

The S&P 500 has been relatively resilient, down just 1.8% from its record high of 7798.99 set on August 13. However, the equal-weight version of the index is down 3.5% over the same period.