U.S.-Iran Conflict Escalates · WTI Breaks $90 · Global Bond Yields Hit Highest Levels Since 2008

Market Overview

Escalating tensions between the United States and Iran sent shockwaves across global markets after U.S. forces began striking targets inside Iran and two oil tankers were attacked in the Strait of Hormuz.

Crude oil prices surged, with WTI jumping 5.20% to settle at $90.22 per barrel and Brent climbing 4.60% to $94.65. The energy shock reignited inflation concerns and triggered a broad selloff across global bond markets. The 10-year U.S. Treasury yield rose to 4.796%, its highest level in nearly 20 months, while Japans benchmark government bond yield climbed above 3% for the first time since 1996. Market-implied odds of a Federal Reserve rate hike surged to 68%.

U.S. equities extended their losing streak to a third consecutive session. The S&P 500 fell 0.71% to 7,631.47, the Nasdaq Composite declined 1.03% to 26,099.77, and the Dow Jones Industrial Average lost 0.79% to 52,766.88. The VIX jumped 9.5% to 16.34.

Despite the geopolitical uncertainty, safe-haven flows did not rotate into precious metals. Gold fell 1.88% to $4,348, while silver dropped 2.42% to $64.62. Bitcoin slipped below $78,000.

In foreign exchange markets, the Japanese yen weakened beyond 160 against the U.S. dollar once again. Meanwhile, Chinas manufacturing PMI rose to 51.5 in August, marking a two-month high.

Key Themes to Watch● Strait of Hormuz Risk Premium Under Repricing

The geopolitical risk premium embedded in crude oil supply has moved from a theoretical concern to a tangible market reality.

The U.S. diesel crack spread has surged above $100 per barrel, suggesting that supply stress in refined products is even more acute than in crude itself. If Iran launches a substantive retaliation, shipping insurance premiums and freight rates are likely to become the next channels through which the shock spreads.

Conversely, if tensions ease, crudes nearly 6% one-day surge could unwind rapidly. The second-round impact of higher energy prices on inflation expectations will be a key driver of both bond-market moves and Federal Reserve pricing this week.

● Bond Markets Pivot From Rate Cuts to Rate Hikes

With the 10-year U.S. Treasury yield approaching 5% and Japans benchmark government bond yield breaking above 3% for the first time in three decades, long-term yields are rising in tandem across major global markets.

The move reflects more than just renewed inflation concerns. It also points to a broader repricing of term premiums.

With market-implied odds of a Federal Reserve rate hike rising to 68%, investors have largely abandoned expectations for monetary easing this year. The August CPI report, due September 11, will determine whether this repricing is validated or reversed. Until then, valuation pressure on risk assets is likely to remain elevated.

● Tail Risk From a Yen Carry-Trade Unwind

The yen has weakened beyond 160 against the dollar for the second time, but the backdrop is markedly different from July.

The probability of a Bank of Japan rate hike in September is now approaching 100%, while U.S. officials have explicitly signaled support for a stronger yen. The growing divergence between the policy backdrop and prevailing market direction suggests that the risk of a carry-trade unwind is building.

JPMorgans 142–146 target range for USD/JPY implies a potential currency move of roughly 10%. If realized, an adjustment of that magnitude could have significant implications for global liquidity and cross-asset positioning.

● AI Infrastructure Capex Moves Into Another Gear

Nvidia has subscribed to $3.5 billion of MediaTek convertible bonds, accounting for roughly 90% of the issuance, while also providing credit support to Anthropic through commitments tied to data-center leases. These developments suggest that relationships across the AI supply chain are evolving beyond traditional supplier arrangements and becoming increasingly embedded in corporate capital structures.

Anthropic‘s $35 billion compute agreement with Lambda, alongside Dell’s decision to raise its full-year revenue guidance from $167 billion to $192 billion, further underscores the continued expansion of AI-related capital expenditures.

However, in a rising-rate environment, long-duration investment narratives of this kind will face increasingly stringent scrutiny as higher discount rates weigh on valuations and expected returns.

Key Events to Watch

• Today: U.S. August ADP employment data

• Today: Bank of Canada interest-rate decision, followed by Governor Tiff Macklems press conference

• Today: South Korea August CPI

• September 2–4: SEMICON Taiwan 2026, with a focus on AI chips, advanced packaging, and high-bandwidth memory (HBM)

• Coke options begin trading on the Dalian Commodity Exchange, with the first batch covering 10 underlying futures contracts, including J2611

• Enflame Technology IPO: Online and offline subscriptions open

• September 11: U.S. August CPI, a key data point for the Federal Reserves potential rate-hike path