US Treasury yields reached their highest level since 2002, which could have profound effects on the future of the Iran and US war. On October 2, the yield on 10-year bonds rose to about 5.24 percent and 30-year bonds to 5.67 percent. This increase in yield means that the market demands a higher cost for lending money to the US government.
Economic Consequences of War and the Bond Market
War comes with heavy costs, but it is not just military expenses that need to be considered. Rising energy costs, inflation, and budget deficits can also lead to economic pressures. Since Treasury bonds are one of the main benchmarks for interest rates in the US economy, an increase in the yield of these bonds can lead to higher borrowing costs for the government and households. This situation may affect investment and economic decisions.
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Oil Market Status and Energy Reserves
Oil prices are also significantly affected by the state of the war and the bond market. On October 1, oil prices reached about $115 for Brent crude and $100 for West Texas crude. This price increase can raise production and transportation costs, thereby reducing household purchasing power. US strategic oil reserves are also at their lowest level since 1982, meaning a decrease in the government's ability to face market shocks.
In this situation, if interest rates remain high to control inflation, lending and economic growth will come under pressure. This situation may lead to stagflation, where economic growth is weak and prices remain high. Therefore, the state of the war and financial markets are heavily interdependent, and any change in one can directly impact the other.
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