Middle East Tensions Impact Oil Supply and Bond Market

Israel conducted a large-scale airstrike on Iran's oil storage facilities, prompting Iran to warn of potential retaliatory actions in nearby regions. According to Ming Pao, concerns are rising over the prolonged impact on crude oil supply, exacerbating the risk of stagflation. Investors are adjusting their expectations for rising inflation and weakening economic prospects, leading to a sharp decline in bond prices and an increase in yields. The yield on the U.S. two-year Treasury note, sensitive to interest rate changes, reached 3.635%, the highest since November last year. Meanwhile, the yield on the U.S. 10-year Treasury note hit a one-month high of 4.216% yesterday.