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President Trump threatens further strikes against Iran as oil prices rise and the dollar strengthens

President Trump threatened further strikes against Iran following the first exchange of direct attacks between the two nations in a month. This escalation in hostilities sent oil prices up over 2%, which fueled inflation worries and triggered a global bond selloff.

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As a result, the dollar index rose 0.16% to 99.57. The 10-year Japanese government bond yield reached 3% for the first time in 30 years, while the 10-year Treasury notes hit their highest yield since January 2025. Federal Reserve Chairman Kevin Warsh indicated that the central bank would have work to do if inflation fails to cool. Following his comments, traders are now pricing in a 68% chance of a September rate hike. Fed Governor Michael Barr also stated that if inflation does not cool quickly, the central bank will increase interest rates. U.S. Treasury Secretary Scott Bessent noted that bond yields reflect accelerating U.S. growth and flat to down inflation expectations. Japanese Finance Minister Satsuki Katayama stated the government will maintain close dialogue with markets regarding the rise in bond yields.

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