Bahrain's air defense systems intercepted several Iranian aerial attacks early today. Tehran simultaneously announced it had targeted a U.S. military base in the region, claiming retaliation for recent provocations.
The two-year Treasury yield fell 12 basis points to 4.58 percent in the first hour of trading. The 10-year dropped eight basis points to 4.32 percent, flattening the curve by four basis points. The move reflects immediate flight to safety and pricing for increased economic uncertainty.
Brent crude futures surged 3.5 percent to $92.40 a barrel—the highest level in three months—on supply concerns tied to the Strait of Hormuz, a critical oil chokepoint. The spike pressures inflation expectations and reduces the likelihood of near-term rate cuts. The U.S. dollar index gained 0.6 percent to 106.1 as investors rotated into the primary global reserve asset. Gold rose 1.1 percent to $2,385 an ounce.
Fixed income portfolios now carry increased duration risk from geopolitical uncertainty. Higher energy prices could force central banks to maintain restrictive policies longer, pressuring bond valuations. Credit spreads in corporate and emerging market bonds face potential widening as perceived default risk increases.
The United Nations Security Council is expected to convene an emergency session later today to discuss the regional escalation.
