Iran War Fuels Rise in Long-Term Treasury Yields

Long-term Treasury yields are expected to continue rising as long as the Iran war lasts. The conflict is putting upward pressure on bond rates, and the 10-year Treasury yield has already increased from 4.5% to 4.7% this month.

The Federal Reserve's policy committee meets again on July 29, but it's unlikely to make any changes to short-term interest rates at this time. However, the war has added pressure to raise rates later, as the Fed fears that high crude oil prices will lead to higher inflation and transportation costs.

Fed Chairman Kevin Warsh has stated that he and his committee are committed to delivering price stability, which may mean raising interest rates if a cease-fire is not reached soon. In fact, experts predict that the 10-year Treasury yield could approach 5.0% by the end of the year without a peace deal.

Mortgage rates have also been affected by the rising Treasury yields, with thirty-year fixed-rate mortgages currently around 6.6%. If a cease-fire is reached, mortgage rates may end 2026 at around 6.5%, but could approach 7.0% if the war continues.