Iran War Sends Warning Signals to US Treasury Market
The US Treasury market is sending warning signs about the ongoing Iran war, as rising oil prices and inflation fears push bond yields higher. The 10-year US Treasury yield rose four basis points to 4.71%, its highest level since January 2025.
Renewed tensions between Washington and Tehran have driven up oil prices, with Brent crude hitting $100 per barrel on Thursday morning. This has significant implications for the global economy, particularly in the US.
The bond market is pricing in a 36% chance of a Federal Reserve interest rate hike next week, according to CME FedWatch. Investors are demanding higher yields on Treasuries due to concerns about inflation and government deficits.
The war with Iran has already cost the United States $37.5 billion, Defense Secretary Pete Hegseth said. Higher deficits mean governments may issue more bonds, increasing supply and potentially prompting traders to demand even higher yields.