By Joy Wiltermuth
Uncertainty over the Iran war is pushing up bond yields
Global crude oil futures are pushing higher to $109 a barrel - levels seen before the April cease-fire between the U.S. and Iran.
The oil shock and elevated inflation are top worries for investors in the bond market as Federal Reserve Chair Jerome Powell prepares to deliver the final press conference of his career at the central bank's helm.
The week will see a grand total of 10 central banks hold meetings, with the expectation being that the lack of crude and petroleum supplies flowing from the Persian Gulf will keep most on hold and reluctant to cut interest rates anytime soon.
Nine weeks into the Iran war, investors in the U.S. stock market still seem optimistic that President Donald Trump will find an off-ramp that eventually brings down oil prices, helps put a lid on inflation and prevents the economy from veering into a ditch.
That notion helped the S&amp;P 500 SPX and Nasdaq composite COMP push deeper into record territory in April, before the rally paused earlier this week.
Yet the jump in crude prices over the past week has Brent oil futures (BRN00) (BRNN26) back above $109 a barrel, a level touched before the April 8 cease-fire agreement between the U.S. and Iran. This has helped put the Treasury market on edge.
&#34;The bond market is taking a big signal from the oil market - and it's not sending a good signal,&#34; said Stephen Douglass, chief economist at fixed-income specialist NISA Investment Advisors.
The 10-year Treasury yield BX:TMUBMUSD10Y was at 4.39% on Wednesday, up from a dip below 4% in early March, according to FactSet. That has kept the costs of new car loans and home mortgages elevated, hurting affordability. Bond prices move inversely with yields, falling as yields climb.
Related: Americans are embracing this terrible car-buying habit. It's costing them thousands of dollars.
What's more, tariff pressures and the war have added to inflation that's been moving higher, not lower, putting the annual rate closer to 3% than to the Fed's 2% target.
&#34;Inflation is a concern for bond investors,&#34; said Andrew Clinton, CEO and founder of Clinton Investment Management. For fixed-income assets, he said, it's the &#34;bogeyman that haunts us.&#34;
Yet if oil prices remain well over $100 a barrel for too long, it can hurt demand, cut into consumer spending and act as a drag on the economy. &#34;The cure for high oil prices is high oil prices,&#34; Clinton said.
Dire predictions from oil analysts and the tone in the stock market have been &#34;night and day,&#34; Douglass at NISA said, adding that a lot is riding on the notion that the war is on a path to being resolved, or at least continuing to de-escalate. &#34;But at some point, we need to see the oil start moving.&#34;
The Fed isn't expected to cut rates on Wednesday afternoon. Oil analysts have warned of a ticking time bomb as crude supplies are depleted, unless there's a resolution that reopens the Strait of Hormuz and allows the free flow of tanker and other shipping traffic to resume.
Read: Jerome Powell's final Fed press conference marks an end to an era
&#34;We are not expecting too much from this meeting, certainly not policy changes,&#34; said Scott Pike, senior portfolio manager at Income Research + Management. &#34;But there is still a significant amount of uncertainty around the current conflict,&#34; he added, with clients watching oil prices and asking if inflation is going to be a problem for the bonds they own.
Yet while they're talking and asking questions, clients haven't been making a notable shift in allocating to things like Treasury inflation-protected securities, which are designed to safeguard against rising price pressures.
&#34;We are not seeing that sort of flow,&#34; Pike said. &#34;We've had periods in the past when concerns increase, and everybody wants to talk about it. But they aren't ready to reallocate based on that.&#34;
-Joy Wiltermuth
This content was created by MarketWatch, which is operated by Dow Jones &amp; Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
04-29-26 1035ET

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The ongoing Iran war is causing a bond selloff as bond yields rise due to uncertainty and increasing oil prices, now above $109 a barrel. Federal Reserve Chair Jerome Powell's final press conference is approaching, with expectations that central banks will hold interest rates steady amid inflation concerns. The bond market is reacting negatively to rising oil prices, which could hurt consumer spending and economic growth. Despite concerns, investors remain optimistic about a resolution to the conflict, but there is significant uncertainty regarding inflation and its impact on bonds.

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Iran war is fueling a bond selloff ahead of Fed Chair Jerome Powell's final press conference