An Iranian provincial official claimed U.S. forces attacked fishing boats off Qeshm Island, according to state media. The unconfirmed report sent crude oil futures up 2.8 percent, pushing Brent crude to $91.50 a barrel in early trading. Two-year Treasury yields dropped five basis points to 4.81 percent as investors moved into traditional safe-haven assets.
The alleged incident occurred near the Strait of Hormuz, a critical chokepoint for global oil shipments. The 10-year Treasury yield fell three basis points to 4.65 percent, steepening the curve slightly as traders repriced potential economic disruption. Increased risk premiums immediately priced into fixed-income markets, particularly for longer-duration assets.
Oil prices rose on supply disruption fears. Higher energy costs would add to inflationary pressures, complicating central banks' rate-cut timelines. Sustained oil price increases would challenge disinflationary trends and extend duration risk for bond portfolios already grappling with higher-for-longer rate expectations.
Broader equity markets retreated significantly. The S&P 500 fell 1.8 percent to $7,580, while the Nasdaq dropped 2.9 percent to $25,437. The U.S. dollar strengthened against major currencies, acting as another safe-haven beneficiary. Currency appreciation could further tighten financial conditions and impact global trade flows and corporate earnings for multinational firms.
