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The yield on the US 10-year Treasury note hovered near 4.3% on Thursday, a level it has largely maintained since mid-month, as traders focused on escalating tensions in the Middle East and the ongoing standoff between the US and Iran. In the latest developments, US President Trump instructed the US Navy to target any vessels laying mines in the Strait of Hormuz and vowed to intensify efforts to secure the strategic waterway. The US continues to enforce a blockade on ships traveling to and from Iranian ports, while Tehran has effectively restricted international maritime traffic. Consequently, oil prices remain well above pre-conflict levels, and activity in the Strait is largely at a standstill.
At the same time, the Federal Reserve is widely expected to leave the federal funds rate unchanged next week and to maintain that stance for most of the year. Markets are currently pricing in a 26% probability of a 25 bps rate cut in December, down from earlier expectations of two cuts this year before the conflict escalated.
