US-Iran War Drives Oil Prices and Treasury Yields Higher

A seven-month war between the United States and Iran has triggered severe global market volatility, driving Brent crude oil prices above $108 a barrel and pushing US 10-year Treasury yields to 5.163%, the highest level since 2007. The instability intensified after President Donald Trump ordered an invasion of Iran and launched an "economic D-Day" campaign of secondary sanctions. In response, Iran blocked the Strait of Hormuz and threatened to expand the conflict to the Indian Ocean.

Geopolitical tensions peaked on September 24, 2026, as Iran-backed Houthi militants fired six ballistic missiles at Saudi Arabia, targeting Taif and Yanbu. While Saudi Arabia intercepted the missiles and increased pumping via its East-West Pipeline, the attacks further spiked energy costs. Simultaneously, the Federal Reserve implemented a 25 basis point rate increase to combat inflation, with officials suggesting further tightening may be warranted.

Diplomatic efforts at the United Nations General Assembly in New York have yielded mixed results. While President Masoud Pezeshkian stated Iran would not bow to US pressure, negotiators are currently exploring a phased peace path. This proposed deal would involve Iran reopening the Strait of Hormuz in exchange for the US lifting its economic blockade. Meanwhile, the White House has faced internal division over a reported 90-day ban on diesel exports intended to lower domestic fuel prices.