Iran War Triggers Drop in Stocks and Bonds Amid Inflation Fears

Investors grew concerned over an inflation shock stemming from the war in Iran, leading to declines in stocks and bonds. Worse-than-expected data releases this week have caused markets to price in a higher likelihood of US interest rate hikes. The war's impact on energy prices and supply chains has intensified inflationary pressures, raising fears that central banks may accelerate tightening measures. Markets are focusing on both geopolitical risks and deteriorating macroeconomic data. Employment and production figures falling short of expectations signal that the economic slowdown could deepen, while sticky inflation weakens expectations for rate cuts. This is creating selling pressure in equity markets and pushing bond yields higher. US 10-year Treasury yields rose amid inflation concerns triggered by the war, while stock indices lost value. Investors turned to safe-haven assets, and the US dollar index (DXY) showed a strengthening trend. However, uncertainties regarding the duration and impact of the war continue to increase market volatility. In the coming period, central bank monetary policy decisions and geopolitical developments will be decisive for market direction. As investors attempt to rebalance their portfolios against inflation and rate hike risks, a volatile trajectory is expected in the short term. This is not investment advice.