US-Iran Tensions Spark Oil Price Surge and Treasury Yield Spike

The US and Iran's diplomatic efforts remain stalled as tensions between the two nations continue to rise. On September 23, Iranian President Masoud Pezeshkian delivered a keynote address at the U.N. General Assembly in New York, where he stated that 'we are not terrorists' and 'will never surrender to the United States.'

Pezeshkian's remarks came after US President Donald Trump repeated his claim that 'a deal will be reached right after the November midterm elections,' a statement that has lost credibility in financial markets. The uncertainty surrounding the war between the two nations has fueled concerns over inflation, leading to a surge in international oil prices and US Treasury yields.

Brent crude futures for November delivery settled at $103.08 a barrel on the ICE Futures Exchange in London, up $3.83, or 3.86%, from the previous session. The 10-year US Treasury yield rose 0.17 percentage points to 5.135%, its highest since July 2007.

The rise in oil prices and Treasury yields was also driven by news that Washington had rejected Tehran's negotiating offer to reopen the Strait of Hormuz within a week. Iranian Foreign Ministry spokesman Esmail Baghaei disclosed the terms of the offer, which included an end to hostile US acts, including the naval blockade and economic terrorism, as well as guarantees of safe passage through the Strait.

The Federal Reserve's likelihood of raising its benchmark rate outright at its October 27-28 meeting has increased to nearly 70%. With gasoline prices and mortgage rates in the US continuing to climb, Republican lawmakers are growing concerned that public sentiment could swing against them in the final stretch of the midterm campaign.