US 30Y Yields at 2007 Highs as Iran War Drives 37% Fed Hike Odds for 2026

The Iran war has become a full-fledged macro shock. Bond markets are flashing red: US 30-year Treasury yields hit their highest level since 2007, reflecting a sharp repricing of real yields and inflationThe rate at which prices rise across an economy. expectations. Oil prices have surged on geopolitical risk premium and genuine supply losses, with Goldman Sachs reporting that global crude stockpiles are being drawn down at a record pace. Simultaneously, markets are now pricing a 37% probability of a Fed rate hike in 2026, a dramatic shift from earlier assumptions of rate cuts.

The inflationThe rate at which prices rise across an economy. impulse is real. Fertilizer costs have spiked, hitting Brazilian farmers and agricultural economies worldwide. Turkey offloaded nearly all its US Treasury holdings in March to support the lira. Energy importers face margin pressure across supply chains. France's economic activity is contracting at the fastest pace since 2020, with the IMF cutting growth forecasts. The euro zone is expected to slow markedly while facing the fastest inflation since 2023. Germany's private-sector activity shrank for a second consecutive month. Emerging Asia currencies, the Indian rupee, Sri Lankan rupee, and others, are moving toward crisis lows.

Equity markets are bifurcating. Defensive, energy-linked, and commodity-correlated assets are holding firm. But broad breadth is deteriorating: mega-cap growth stocks that benefit from lower rates are struggling, while bond yields climb. Walmart flagged that rising fuel costs could pressure margins and consumer pricing. The Magnolia-7 names that dominated 2024-2025 are now fighting headwinds. Concentration risk is peaking just as the macro backdrop turns adversarial.

What keeps this from full panic is the possibility of a quick peace resolution. Trump has claimed Iran talks are in final stages, and every headline suggesting progress lifts risk assets temporarily. But the structural issue, that energy inflationThe rate at which prices rise across an economy. may be here for much longer, and that central banks may not cut rates as eagerly as hoped, has shifted market positioning. Credit spreads are widening, equity option volatility is elevated, and foreign investors are rotating into safety and diversification.