A fragile US-Iran truce holds, but shipping through a critical waterway remains crippled—forcing bond and energy markets to reprice inflation risk upward.

The Ceasefire Holds, But Damage Lingers

Five weeks into a US-Iran ceasefire, fighting has stopped, but the economic damage it caused—and the uncertainty about its durability—continues to ripple through global markets. The real problem isn't the words on paper; it's the Strait of Hormuz, one of the world's most critical oil chokepoints.

Shipping Remains at a Trickle

Shipping traffic through the Strait of Hormuz—the waterway between Iran and Oman—sits at just 5% of pre-conflict levels. That's not a full blockade, but it's close enough to keep energy markets nervous. Even with fighting paused, traders are pricing in the risk that the ceasefire could shatter, cutting off a vital supply line again.

Bonds Signal Inflation Fears

The damage shows up most clearly in US Treasury yields. The 10-year yield has climbed roughly 10 basis points as oil prices and geopolitical risk have repriced inflation expectations higher. Higher energy costs feed into broader inflation, which pushes bond yields up. It's a straightforward chain: supply fear → oil costs more → everything costs more → bonds yield more to compensate.

What Markets Are Watching

For investors tracking global risk, three things matter most right now: developments around the Strait of Hormuz itself, oil-price volatility, and the broader US-Iran dynamic. Those flows ripple into the US 10-year yield and the dollar index—the bellwether gauges for how much inflation risk markets are pricing in. Any escalation or surprise de-escalation can move both sharply. Until shipping normalizes, expect bond and energy markets to stay twitchy.