Iran’s ban on US and Israeli vessels in the Persian Gulf lifts oil prices and inflation fears, boosting Fed rate hike probabilities to 58%.
US Treasury yields climbed across the curve as Iran’s ban on US and Israeli ships in the Persian Gulf sent West Texas Intermediate (WTI) crude up 2.85% to $76.45 per barrel. The move heightened inflation concerns ahead of Friday’s nonfarm payrolls report, with the 10-year yield rising nearly six basis points to 4.672%.
Money markets now price a 58% chance of a 25 basis points Fed rate hike in September, up from earlier expectations. The current federal funds rate stands at 3.50%–3.75%, with traders split on the next move. Recent attacks on Saudi tankers in the Red Sea added to geopolitical tensions, further pressuring oil markets.
San Francisco Fed President Mary Daly and Governor Lisa Cook have signaled support for holding rates steady, citing the need for more data. However, market pricing reflects growing bets on tighter monetary policy amid persistent inflation risks.