The U.S. Treasury bond market and oil prices reached levels on October 1 (Mehr 9) that displayed signs of increasing economic pressure due to the continuation of the war with Iran. On this day, the yield on 10-year bonds rose to 5.24% and 30-year bonds to 5.67%, the highest levels since 2002.
State of the Treasury Bond Market
The U.S. government borrows money from the public and investors to fund its expenses and issues Treasury bonds in return. When the yield on these bonds increases, it indicates that the market demands a higher return for lending money to the U.S. government. This situation can negatively impact lending and economic growth.
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Consequences of Rising Oil Prices
Alongside this, Brent crude oil prices reached around $115 and West Texas Intermediate prices around $100 on October 1. This increase in prices could mean higher transportation and production costs, ultimately reducing household purchasing power. If these two situations, namely rising bond yields and increasing oil prices, occur simultaneously, the U.S. economy may face a situation close to "stagflation."
The energy reserves of the U.S. are also significant in this context. The strategic oil reserve of the U.S. reached about 284 million barrels in the week ending September 25 (Mehr 3), which is 30% lower than a year ago and the lowest level since 1982. This decrease in strategic reserves limits the U.S. government's ability to respond to market shocks.
In these circumstances, the behavior of oil tankers is also a key factor. Several incidents involving commercial vessels in the Strait of Hormuz have been reported, with the number of targeted ships reaching seven in recent days. This situation indicates an escalation of tensions and the complexity of conditions in the oil and energy market following increased military tensions.
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