The escalating conflict in Iran and the prolonged closure of the Strait of Hormuz have triggered a profound energy-supply shock, sending shockwaves through global supply chains. This geopolitical gridlock has fueled sticky inflation and ignited a relentless global bond selloff, pushing long-term yields to nearly two-decade highs and complicating the macroeconomic landscape for incoming Federal Reserve Chair Kevin Warsh.
Yields on the US Treasury’s longest-dated bond surged to their highest level since 2007 as accelerating inflation fears fueled a massive selloff in global debt markets. The spike in yields—with traders increasingly zeroing in on the 5.5% mark—is unravelling Wall Street’s crowded artificial intelligence and chipmaker trades. This global bond market rout is complicating the landscape for central bankers, particularly incoming Federal Reserve Chair Kevin Warsh and the European Central Bank, as they grapple with the persistent energy price shock stemming from the conflict in Iran.