Overview
- U.S. Central Command reported strikes on Iranian targets and Iran carried out retaliatory attacks on Tuesday, sending Brent above $90 per barrel and reviving fears of supply disruptions through the Strait of Hormuz.
- The selloff in government bonds accelerated on Tuesday with the U.S. 10-year Treasury yield near 4.79% and the two-year in the mid-4% range as investors demanded higher returns to compensate for rising inflation risks.
- Traders sharply raised the odds of a Fed rate hike at the mid-September meeting to roughly 60–70%, a move reflected in money-market pricing and large jumps in short-term yields.
- U.S. equity markets fell, with the Dow down about 400 points, growth and long-duration tech shares under the most pressure while energy stocks rose, and higher yields are already raising mortgage and corporate borrowing costs.
- Underlying fiscal and supply pressures — large government deficits, heavy corporate debt issuance, and only limited Treasury long-end buybacks — amplified the move and make upcoming CPI, payrolls and the September Fed meeting key near-term catalysts.