The yield on the US 10-year Treasury note held around 4.26% on Friday, hovering near five-week highs as escalations in the Middle East conflict and rising oil prices fueled concerns about resurgent inflation, reinforcing bets that the Federal Reserve will keep interest rates higher for longer. The central bank is widely expected to hold the fed funds rate steady next week, though focus will turn to the updated dot plot and policymakers’ projections for the remainder of the year. Inflation risks also led markets to push back expectations for the next Fed rate cut from July to September. Investors now await January’s PCE price index, the Fed’s preferred inflation gauge, for fresh insights on price trends, though it will not capture the impact of the Iran war. Oil prices surged after Iran’s new supreme leader, Mojtaba Khamenei, pledged to keep the Strait of Hormuz effectively closed while Tehran intensified attacks on regional oil and transport facilities.
